duvvuri subbarao : strengthening imf surveillance talking points of dr duvvuri subbarao, governor of the reserve bank of india, at a seminar on “ strengthening imf surveillance ”, imf spring meetings, washington dc, 16 april 2013. * * * question 1 : over the next three to five years, what do you see as the critical issues for imf surveillance? response there are several critical issues for imf surveillance over the next three to five years. i want to focus on two of them. ( i ) is the imf able to analyze and understand the growing complexity of global linkages? ( ii ) does the imf have an objective, unbiased and contestable view on various aspects of capital account management! i will look at these issues from an emerging market ( em ) perspective. ( i ) growing complexity of global linkages • we are all agreed that global interlinkages have become stronger, more complex and potentially more disruptive. the imf needs to be ahead of the intellectual curve in understanding these linkages. models used by imf – could not predict spillovers before crisis • so far research within and outside imf has been focussed on trying to understand linkages through trade, finance and confidence channels. it is not clear that we have a clear understanding of the spillovers through these channels. the spillovers predicted by the models that we use are small relative to the reality of the large and pervasive spillovers that we saw during the global financial crisis and are seeing through the ongoing eurozone crisis. this clearly suggests that the assumptions underlying these models are incomplete if not flawed. greece, cyprus, spain have had much greater impact on emes than we thought possible. • among large emerging economies, india was by far the least integrated into the global economy. even so, india too was affected by the crisis by much more than we thought. impact of qe on ems • first, we all understand and admit that the extraordinary accommodative monetary conditions in aes is transmitting to ems through capital flows, exchange rates and global commodity prices. • the question is : has this transmission channel become stronger now than before because of : ( i ) the greater openness of ems ; ( ii ) the extent of monetary easing in the aes ; ( iii ) the duration of qe ; ( iv ) forward guidance that qe will stay for an extended period. the question is, do our models

from corporate bonds and government securities, from 31. 5. 2015 to 30. 06. 2017. g ) credit enhancement by iifcl : it has been mentioned in the union budget 2013 – 14 that iifcl will provide partial credit guarantee to enhance ratings of bond issues, enabling bis central bankers ’ speeches channelization of long - term funds for infrastructure projects. iifcl is presently undertaking pilot transactions under its credit enhancement initiative. h ) introduction of rupee linked offshore bonds by international finance corporation ( ifc ) : with an objective to signal confidence in the indian economy and encourage inflows of usd in india, ifc was permitted to float a rupee linked bond overseas for an amount of usd 1 billion. ifc received very good response and the limit has been fully utilized by ifc. i ) domestic issuance of bonds by ifc : approval has also been given to ifc to issue bonds in india worth ₹ 15000 crore for infrastructure financing. this will also facilitate development of benchmark yield for long term corporate bonds. way forward 17. going forward, we expect a special impetus to the growth of corporate debt market in our guidance to the banks to issue long term bonds to support infrastructure and housing projects. further, in order to meet the capital requirements under the basel iii framework, banks will tap the market with their additional tier 1 bonds, besides tier 2 bonds. these developments can usher in emergence of quasi government yield curve, which can serve as benchmark for corporate issuances. when the basel 3 framework relating to large exposure norms take effect, and as banks reach their limits in supporting direct lending to the corporate sector, corporates be nudged to resort to market borrowing. on top of this, the expected robust economic growth will also compel the corporate sector to approach the market. keeping all these in perspective, we need to ready ourselves with the following measures to usher in a vibrant corporate debt market : a ) regulatory and administrative reforms to institutionalize debt markets, b ) involvement of market - makers who can provide two - way bid - ask quotes, c ) enhancement of investor base, d ) increasing the efficiency of these markets through better reporting, settlement and clearing platforms, e ) emphasis on the reduction of information asymmetry. conclusion 18. to conclude, the debt markets is undoubtedly a very essential segment of the country ’ s financial markets and vibrancy in these markets is imperative to meeting the massive funding requirements of the country. i am confident that this conference