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Restrict FII participation to debt mkt: Assocham

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The Associated Chambers of Commerce and Industry of India (Assocham) has expressed its view to the Finance Ministry that in the context of existing market conditions, it shouldn’t further expand debt market to Foreign Institutional Investors (FIIs) beyond US$ 5 billion (Rs.25,000 crore) to support its huge borrowing plan. It could be counter productive since present market conditions are not conducive to opening up of FIIs further to domestic debt markets, it argued.
Currently, the cap fixed for FIIs participation in debt market is US$ 5 billion (Rs.25,000 crore) and the Finance Ministry is being persuaded to further liberalise and open it up with argument that it would help government to raise sufficient funds to support its borrowing programmes. The government proposes to borrow Rs.4,50,000 crore in fiscal 2009-10 to support its infrastructure and other developmental projects for which one way out is being suggested and i.e. widening of existing cap for FIIs so that these can liberally take part in India’s hitherto almost closed debt market.
In a statement, Assocham president, Sajjan Jindal said: “The Indian market needs to grow domestically to match any of the emerging markets with extended scope and innovation to financial instruments and participation to large number of players. Any further liberalization presently is not likely to improve the flow of global funds in the debt market and therefore the government could consider whether the debt market should also include the private debt with adequate safeguards and regulatory framework in place."

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