Stimulus calls for a Bond Market

Context: The government needs to push for the corporate bond market and credit guarantee mechanism in order to boost investment and demand.

Recommended steps:

• Policy induced Insurance & pension Funds: to invest bonds issued to fund viable infrastructure projects.

• Creating a Corporate Bond Market: Money raised from RBI through it can then be used by State owned vehicles to invest in corporate NBFC bonds to finance infrastructure bonds. This would also encourage foreign investors.

• Reduce Taxes: eliminate Transaction Taxes, and burden of stamp duty be minimal and uniform across states.

• Discourage bank funding for long gestation projects: it leads to routine asset liability mismatches.

• Operationalize Credit Guarantee Enhancement Corporation: it can free up about Rs 3.5 lakh crore of bank exposure to the infrastructure sector.