The FSAP process has been running for roughly a decade now, and roughly two-thirds of countries have done an FSAP. Many countries choose to release these reports so as to feed them back into the information arteries of the global financial system. These reports can be found on the website of the IMF.

Let us remember the benefits India gets by undertaking such an exercise. For a foreigner, Indian finance is difficult to comprehend. On the one hand are some world-class elements, such as the index derivatives trading at NSE. Side by side with this are problems such the malfunctioning bond-currency-derivatives nexus, or the political influences in Indian finance, with features such as SEBI being prevented from questioning Raju for so long. Global finance has to struggle when making investment decisions in India. The reduction of fuzziness that FSAP provides would help. The FSAP gains legitimacy through three instruments: independence from the government, the use of internationally respected experts, and the stamp of the World Bank and the IMF. A “self-assessment”, executed by civil servants and their friends, by definition, offers none of these benefits.

This is evident when we look at what the report has to say about accounting standards. The International Auditing Standards (ISAs) are widely accepted in India. Some gaps need to be addressed in areas relating to convergence with the ISAs, implementation of auditing standards, strengthening peer review, access to working papers and independence of auditors. Given the state of auditing and accounting standards in India, especially given the loss of confidence after the Satyam scandal, the government would only undermine its own credibility were it to release a report that points to access to working papers as one of the major gaps.

... contd.