mr reddy looks at some issues in developing the government securities market in india inaugural address by dr y v reddy, deputy governor of the reserve bank of india, at the seminar on government securities market organised by primary dealers association of india, calcutta, on 4 january 2000. * * * mr ramesh and friends, i am happy to be here with you today at the second in the series of seminars conducted by the primary dealers association of india. since i delivered the inaugural address at the first seminar in chennai last year, the number of primary dealers ( pds ) has increased from six to fourteen. so, let me welcome the new additions to the family at this seminar. i participated in a bank for international settlements meeting last month in which one of the subjects related to debt markets. during the discussions, it became evident that after the recent asian crises, the issue of development of domestic bond market has gained credence. many central banks of emerging markets have recently shown interest in developing their debt markets. they were appreciative of the fact that we in india concentrated on financial sector reform early in the reform cycle, and we are focussing not merely on development of equity markets but also on debt markets, especially government securities market. among the initiatives taken by reserve bank of india ( rbi ) in developing the government securities market, undoubtedly the institution of pds is very significant. the rbi initially promoted and owned a primary dealership ; and within a few years, divested itself of controlling interest. soon, domestic financial institutions promoted some primary dealerships. more recently, we have pds with the benefit of international experience. the rbi believes that this is an appropriate path and pace for bringing about gradual but speedy and sustainable reform in the financial sector. the rbi has been closely coordinating with primary dealers on a number of policy and operational issues, both through continuous consultations with the primary dealers and through mr ramesh ’ s membership in the technical advisory committee on financial markets. and, i must place on record that we are appreciative of the contributions. together, we are ahead on the learning curve in this regard, and we will continue to learn from the experience gained from our own reform process and from the international experience. developments in government securities market let us briefly recall the objectives of reforms relating to the government securities market in india since 1991 - 92. first, reform has aimed at increasing the operational autonomy of the rbi by measures such as abolition of automatic monetisation through ad hoc treasury bills

recovery takes hold, the quality of jobs will improve and allow wages to rise, but this will take time. are the reforms undertaken by the euro area countries going in the right direction? it ’ s not the ecb ’ s job to give lectures. our mandate is to protect the purchasing power of the people of europe. growth has returned in all the euro area countries and consumer confidence across europe is at its highest for 16 years. the priority now is to achieve greater convergence between the countries and thus create a more resilient economic bloc. every country must continue with its reforms : in particular france, but also germany. does the economic transformation of france promised by emmanuel macron go far enough? it will enable france to make up for lost time. the return of growth in europe is offering france a 1 / 2 bis central bankers'speeches unique opportunity to pursue a coherent set of reforms in order to rectify its weaknesses : persistent unemployment, inadequate training, deficits in public finance and external trade. but this is happening at a time when globalisation and technological change are creating uncertainty. more flexibility is needed, it ’ s true, but we shouldn ’ t forget those who get left behind by this model. and the level of france ’ s public debt? on the budgetary front, france still faces a predicament. its deficit is falling, but mainly because the economy is growing again. if the economic climate changes, where will the room for manoeuvre be? it ’ s now high time that france, the second - largest economy in the euro area, let go of the ecb ’ s monetary policy. what institutional reforms will be needed to consolidate the euro area? that ’ s a matter for the heads of state and government. for a long time i have favoured the establishment of a euro area finance ministry. provided it was given the right financial tools, this would facilitate the handling of the next crisis without having to rely excessively on the ecb, which was mainly the case these past few years. but for the ministry to come into being, a degree of trust has to be recreated between the countries. in this discussion, the reforms and the serious nature of france ’ s budget are a test case. let ’ s also prevent the common budget from absolving governments of their budgetary responsibilities. would a european monetary fund make sense? i am not one of those who think that europe should get rid of the international monetary fund ( imf ). the