Financial Times

Vajpayee demands clean trading on stock markets

NEW DELHI, (AFP) - Indian Prime Minister Atal Behari Vajpayee on Friday attacked the country's scandal-hit stock exchanges and told regulators to make markets safer for investors.

His attack came less than a month after a joint parliamentary commission in a 452-page white paper flayed bourses, the central bank, finance ministry and bourse watchdog Securities Exchange Board of India (SEBI) for a string of scandals that have hit millions of investors.

Vajpayee, speaking at the launch here by SEBI of a nationwide campaign for investor awareness, called for more rigour in the market place.

"We need markets that are known for their safety and integrity. We need knowledgeable investors. And we need to build a sustainable, high-growth economy which will ensure better living conditions for our people, now and in the future," Vajpayee said.

"I urge all of you present here: Regulators, market intermediaries and investors, to join hands to make our capital market the safest places to invest in the world," the premier said, flagging of the SEBI campaign.

SEBI was set a year after a coterie of stock brokers headed by key trader "Big Bull" Harshad Mehta in 1991 artificially jacked up prices of worthless securities to rake in 50 billion rupees (1.38 billion dollars) when the rupee was pegged at 36 to the US currency.

Vajpayee did not refer to individual scandals that in particular have plagued the Bombay Stock Exchange, India's largest bourse, but said poor company management had been a cause of the illness of Indian markets.

"While the technology and the regulatory framework of capital markets has improved, I am pained to say the standards of corporate governance have not kept pace.

"We have come across far too many instances of companies that have raised money from the market by creating hype and then defrauding their investors," he said.

"Stockmarket scandals brought a bad name to the Indian business community and this is how boom became bust and hopes turned to dust for many gullible investors.

"This is how the investor community lost confidence in the market, leading to prolonged stagnation. This is how investable savings turned to non-financial assets or safe bank deposits," Vajpayee said.

The premier's tongue-lashing to market operators did not spare the Unit Trust of India, the country's largest mutual fund which was given 30 billion rupees in bailout dole last year to pay back millions of investors.

"We have to learn the right lessons from our experience of the past few years," he said, adding the fact that few companies tapped the primary markets in recent years had become a cause of worry for his government. Finance Minister Jaswant Singh, meanwhile, echoing Vajpayee's appeal, said more teeth recently given to SEBI offered it the legal right to impose sterner penalties on violators of stock market rules.

"The SEBI Act has been amended to further strengthen the regulator. It is our expectation that a strong regulator and enhancing the penalty limits would deter evaders and bolster confidence of investors," Singh told the meeting. He said the capital market was not only a part of India's growing economy but also provided an alternate source of funds and hence it had a vital role to play in boosting investor confidence."Although Indian stock exchanges rub shoulders with the best international bourses, Indian investors continue to remain disenchanted," the finance minister added.

World Bank pleased with Sri Lanka's economic progress-Choksy

The World Bank has expressed satisfaction at Sri Lanka's economic development and growth, particularly the 5.3 percent recorded in the third quarter last year, Finance Minister K.N. Choksy said.

"Mieko Nishimizu, World Bank Vice President for South Asia, was pleased with the progress in the Sri Lankan economy, " he noted last week after a meeting with the visiting senior World Bank official. Nishimuzu also met Prime Minister Ranil Wickremesinghe.

The World Bank discussed the country's economic performance last year and also the proposed Poverty Reduction Growth Facility (PRGF) agreement between the bank, the IMF and the Sri Lankan government for 2003-2006. The bank's executive board of directors is expected to approve this in March.

Choksy said falling inflation rates to nine percent last year from 14 percent in the previous year, and an improvement in the utilisation of funds, were also explained to the World Bank vice president.

He said an IMF review mission is expected in Colombo next week for a detailed review of the performance including that of every government ministry.

Back to Business