1.        COMMENTS OF DR. KALYAN RAIPURIA, SENIOR ECONOMIC ADVISER DEPARTMENT OF CONSUMER AFFAIRS

 

 

 

Sub:   Draft Report of Task Force on Convergence – Some Comments by Dr. kalyan Raipuria, Sr. Economic Adviser

 

 

 

            I am thankful to the Drafting Group for looking at my comments given earlier.  Some of them have been incorporated.  My comments on the present draft are following :

 

(i)                 The hype about the reforms in securities market and the SEBI is imbalanced.  The balance can be brought only if the flip side is also brought out.  The repeated mention of crores of rupees capital expenditure is unclear in the sense that how do the new Exchange care.  No body seems to have details.  It is not a lumpy investment.  It is microfied.  It is the market to decide who and how should it be used or not used by the Exchanges.

 

(ii)               The status of commodity market dealt with in para 2.4 is absolutely inadequate, eclipsing the role played by the FMC and the Department in promoting i.e. deepening and widening the market during last two and half years.

 

(iii)             The mention in para 4.2.4.2 that the DEA has ‘wider mandate’ is to be questioned.  I do not know which mandate is being talked about and in what respect, and how it empowers the DEA, and not Department of Agriculture or Department of Industrial Development or Department of Commerce.  The readers will be surprised  as to how DEA’s mandate empowers it to take over commodity futures.

 

(iv)              The US model is mentioned as ‘a unique model’ in 4.2.6.2.  It is recognized that the CFTC regulates all derivatives markets while the  SEC regulates the spot markets for securities.  The lesson to be learned would be that let the FMC (in India) also regulate all derivatives markets and the SEC confines itself to spot markets for securities.  Let us not draw biased conclusions.

 

(v)                As for the option of having two Divisions in the SEBI corresponding to two present Commissions, the players are going to question as to how the situation would be different except that commodity futures will be a subdued segment, an adopted orphaned baby.

 

(vi)              Induction of Secretary, DCA in Coordination Committee on Capital Markets (DEA) may not help, and should be pursued any way for taking consumers interest in discussions and decisions.

 

 

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(vii)            All in all, much ado about the poor and week FMC has been made in the Draft.  How come then fast progress in opening, widening and expanding the market, though narrow based, has taken place.  What would be the relevance of Amendments if the recommended options are cleared.  The whole effort of the Department and the Standing Parliamentary Committee will atrophy. An interview with Mr. Howard Davies, Chairman, FSA (UK) shows that even outside observers are convinced that in India there is still quite a good argument to have different regulators and India is little away from the kind of convergence UK have done.  (See Business Standard March 17, 2000).