The Economic Survey 2008-09 has suggested far-reaching reforms for Indian financial markets. To begin with, it calls for a review and the phasing out of surcharges, cesses, taxes on transactions such as securities transaction tax (STT), commodities transaction tax (CTT) and fringe benefit tax (FBT).

The survey also proposes bringing all financial market regulations under one entity — the Securities and Exchange Board of India (Sebi) — with a view to encourage development of an integrated policy framework.

According to the survey, high net worth individuals (HNIs) should be allowed to register and invest directly through authorised Indian investment intermediaries. It advocates banning of indirect routes of investment such as P Notes.

The survey also contains a number of suggestions for reforming debt markets. “Broaden and deepen the long-term debt market by liberalising investment norms for insurance and pension funds, and through the development of credit enhancement institutions. The government can consider a guarantee mechanism (a fund) for credit enhancement of long-term infrastructure debt. Moreover, tax incentives for long-term debt markets can be considered,” the survey says.

In a move that would benefit the corporate debt market, the survey has asked the government to introduce or allow repos and derivatives in corporate debt.

The survey also urges lifting of the ban on futures contracts to facilitate price discovery and risk-management. It also favours developing the spot and futures currency markets (exchange traded) further. “Extend spot commodity trading in electronic form to agricultural markets by involving agriculture product marketing companies (APMCs),” the survey says.

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