Rupee denominated bonds — both government and corporate — can be immediately placed on a par with equity in our treatment of FIIs. This is a critical element of the MIFC agenda, and one that benefits India in any case, by easing public debt management and enhancing bond market access for medium-sized firms. It is an urgent requirement because it will reduce the extent of foreign currency borrowing and, hence, currency mismatch, which is now taking place with firms.

Greater entry for private banks, and the elimination of branch licensing requirements, can immediately improve competition in banking. This is feasible immediately. The integration of finance into the GST is a key piece of the puzzle. The government needs to appoint a committee with experts like Amaresh Bagchi and Satya Poddar, along with practitioners in international finance, in order to plan out the mechanics. More generally, this committee should be tasked with identifying and eliminating harmful aspects of taxation which impede export-oriented financial services production based on the core principle of “you do not tax foreign consumers”.

An expert committee needs to be set up to redesign the RBI, to draft the legislation governing the Indian Monetary Authority, and to design the analytical and operational framework through which an IMA will achieve inflation targeting on a day-to-day basis.

One big milestone in the removal of conflicts of interest is the decision announced in the 2007 budget speech, to set up the Debt Management Office. It is now time to resurrect G.V. Ramakrishna’s idea of a National Shareholding Trust in order to perform ownership and governance functions for PSU banks, so as to remove the conflict of interest of bank ownership away from both RBI and ministry of finance.

... contd.