Former Prime Minister of India - Shri Atal Bihari Vajpayee

Shri Atal Bihari Vajpayee's Inaugural Address at the Securities Market Awareness Campaign

I am very happy to be here with all of you this morning.

India has had a long and indigenous tradition of savings and entrepreneurship. Even when India was not free we were always quick to adopt and develop the most contemporary ways to channel savings into profitable business ventures. No wonder, we set up the first stock exchange in Asia. I have a pleasant memory of my visit to Jeejebhoy Towers, the home of the Bombay Stock Exchange, when it celebrated its 125th anniversary. The tall building of BSE is in many ways a symbol of India’s aspiration as well as potential to be a leading economic power in the world.

The Indian economy has proved its strength and resilience. Ours is one of the fastest growing economies in the world. Today, I pay tribute to the contribution of the capital market to the remarkable growth of Indian businesses. Many of them have proved their worth in the face of adverse business conditions as well as tough international competition. Their growth was fueled by the moneys that they raised on the stockmarket. The confidence they created led to a rapid expansion of the investor community in India. Terms like Sensex began to be talked about even in small towns. Therefore, the present lull on BSE and NSE should not blind us to the intrinsic strengths of our capital market.

At the same time, the prolonged quiet in the stockmarket has tested the confidence of the small investor, who is the backbone of the securities market. If investors are not attracted, then companies will not be able to raise money through the capital market. The Indian household investor, of late, has been putting much of his savings in non-financial assets. Even within financial assets, most of the savings are going to the banking system. This is not the best or the most productive use of our savings.

Therefore, we should all make concerted efforts to motivate savers and investors to put their money into shares and bonds so that the economy benefits through a vigorous and dynamic capital market.

Today, it is pertinent to ask ourselves: why is the investor shying away from the market? The core issue is investor confidence. To build this confidence, we need to make people aware of the different investment options available in the market. They should also be made aware of the regulatory safeguards that we have recently put in place to protect their legitimate interests, including ensuring SEBI’s independence and professionalism.

It is for this reason that I wholeheartedly commend SEBI for launching a nationwide awareness campaign for the first time. It is especially heartening to note that the campaign is directed at small investors. Large individual or institutional investors do not need such campaigns. They have access to all the sophisticated information that they need. It is ordinary savers who need to be attracted to the market; and once attracted, retained despite the normal ups and downs that are natural to this type of investment.

Today India can boast of one of the most modern capital markets in the world, where almost all trading is paperless. Information and communication technologies have enabled investors, including small investors, to buy and sell shares almost instantaneously, wherever they are.

However, while the technology and the regulatory framework of capital markets has improved, I am pained to say that the standards of corporate governance have not kept pace. Of course, we have several companies that have become role models of good corporate governance. These companies have earned national and international acclaim.

However, there are also many more companies that often use questionable and even illegal means to achieve their ends. In recent years, 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. Many of them issued shares at a hefty premium; most of their scrips are now trading well below their face value. Stockmarket scams brought a bad name to the Indian business community.

This is how boom became bust and hopes turned to dust for many gullible investors. And this is how the investor community lost confidence in the market, leading to prolonged stagnation. This is how investible savings turned to non-financial assets or safe bank deposits. The fact that very few companies have tapped the primary market in recent years is certainly a cause for worry.

The travails of UTI must have caused heartburn to millions of small investors, especially those from the middle class and senior citizens. Our government has recently completed a major revamp of the UTI, in which we have taken every care to protect the interests of small investors.

Therefore, we have to learn the right lessons from our experience of the past few years. 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.

I quote here from Kautilya’s Arthashastra, ~The root of wealth is economic activity and lack of it brings material distress. In the absence of fruitful activity, both current prosperity and future growth are in danger of destruction~. Even in the 21st century, Kautilya’s words are relevant.

A high rate of domestic savings, channeled into productive investments are important to achieve the eight percent growth in GDP that we have set for ourselves in the Tenth Plan. Indian industry needs large capital to attain this growth rate. For that, we need to encourage present savers to save more and also to bring in new savers.

With economic liberalization and globalization the market is becoming more important, and foreign investors have also become major players in India. In a deregulated market, the regulator has to be highly alert and alive to new developments, both domestic and overseas, that can take place.

I want you to make sure that financial security should not be the privilege of a few but can be the hope of every Indian citizen. Financial literacy is an essential tool to turn this hope into reality. While expanding financial literacy, my first advice to you all is to make sure that your investor awareness campaign has no jargon and complexities.

My second advice is for you to bear in mind that India is a diverse country with different languages. Most Indians do not know English. But that does not mean that they do not have investible savings. Many of our rural areas have become thriving centres of prosperity. Therefore, you need to introduce this financial literacy campaign in all regional languages and in Hindi. Here you should work closely with the dynamic and fast growing regional media, both print and electronic.

Investor education is not the domain of the Government or the regulator alone. Investor associations, stock exchanges, and companies also play a major role in making investors more aware of their rights and in helping investors to make informed investment decisions by educating them about new instruments and products through seminars, workshops, and training programs.

I urge all of you present here: regulator, market intermediaries and investors to join hands to make our capital market the safest places to invest in the world.

Thank you.