Indo-Us Jbc Presses For Financial Sector Reforms

The council, which provides the biggest forum for US and Indian businessmen to deliberate on general economic environment and areas of joint co-operation, was organised by the Associated Chambers of Commerce (Assocham) and the Federation of Indian Chambers of Commerce and Industry..

The council appreciated the governments move to allow greater competition in the economy. In the financial sector, businessmen stressed on the need to revive the stock market. Finance secretary Montek Singh Ahluwalia said he was open to recommendations for policy changes in the capital market but said the suggestions should apply to the bull and bear markets. The council also called for removal of restrictions on broking firms and market makers to raise working capital. It said India should make its external borrowing limit more flexible as the country has the potential to raise debt in the international market.

 

Earlier, the finance secretary told the session that India will be able to achieve 6.5 per cent growth in the current fiscal despite a slow down in the industrial growth. Regarding the insurance sector, the session made the following observations:

The UF government has included insurance reforms in its common minimum programme and this reflects the importance it attaches to this sector.

JBC commended the government for establishing the Insurance Regulatory Authority.

Inappropriate investment opportunities for small investors in the insurance sector since it normally takes a start up general insurer five years before it can declare a dividend and start up life insurer seven to nine years.

The initial 100 per cent equity of promoters should be extended to a minimum of five years before requiring public share offerings to be reviewed.

As a step towards freeing reinsurance placement, private companies should accept the statutory cession to the General Insurance Co (GIC) for reasonable percentage not exceeding say 10-15 per cent.

Regarding the power sector, the joint business council called upon the power ministry to publicise and clarify its action plan for development and establish a viable time table for implementing this plan. The council suggested that the list of projects which will receive allocations of liquid fuel under the provisional policy should be published.

The bankability of the state electricity boards must be assured in the immediate future, it said.

Internationally competitive financial incentives must be established to attract investment to the power sector.

The Independent Regulatory Authority must be established quickly to insulate power development from external influences.

The council also felt that the national energy policy should be developed soon to assure the viability of power generation, transmission and distribution in the long term.

It called for structural changes in the long-term policy on transportation and added that short-term solutions include traffic management improvement and operational efficiencies.