I am truly delighted to participate in SEBI’s Silver Jubilee celebrations. I share a very special bond with SEBI because I was the Finance Minister of India when it became a statutory body. I have watched the evolution of SEBI since then with great interest, and I can say with confidence that the institution has every reason to be proud of its achievements. I congratulate all those who have been associated with the growth of this unique institution of our country.

SEBI has successfully modernised our capital markets and brought international best practice to this very important sector of our economy. It is a matter of pride that the Indian stock exchanges today rank among the very best in the world in terms of technology as well as value-cum-volume of business. This in a large measure is due to the valiant efforts of SEBI.

The protection of the interests of investors in securities is central to the mandate of SEBI. It should give us a sense of satisfaction that the Indian securities market has seen major improvements in this area in the last 25 years.

Dematerialization of shares has eliminated the problems of delays, bad deliveries, theft and forgery of share certificates. At the same time it has facilitated the introduction of shorter settlement cycles and later rolling settlement. India is among the first countries in the world to have large screen-based trading in which the price and volume data become instantly available to investors in all parts of our vast country. Computerised trading has led to reduction in the scope for price rigging and manipulation.

Investors are more empowered today than ever before because of the availability of a large amount of relevant information. The issuance of Initial Public Offers (IPO) has undergone a major reform process with special focus on protection of the interests of retail investors. The new method for divestment of shares through Offer for sale of shares held by promoters to the public has proved to be very successful, including for PSU disinvestment transactions.

Recently, a number of steps have been taken to attract retail investors into the market such as the introduction of Rajiv Gandhi equity savings scheme, incentives for Mutual funds to reach beyond the top 15 cities, separate plan for direct investment in existing as well as new schemes in Mutual Funds, expansion of asset classes that can be held in demat form and so on. I am confident that these measures will enthuse retail investors to access capital markets, increase financial intermediation, widen and deepen our financial system and positively influence the distribution of savings in favour of financial assets.

The high growth rates that the Indian economy has witnessed in the last decade or so have been driven by enhanced savings and investment rates. Gross Domestic Savings (GDS) as a percentage of GDP increased from 23.7 per cent in the year 2000–01 to 36.8 per cent in 2007–08. It declined thereafter to 30.8 per cent in 2011-12 and we must and we will bring it back to the earlier levels. Higher savings and investment rates are the most productive when there is effective intermediation through a well functioning capital markets.

The imperative of growth requires an increasing proportion of savings getting channelized into financial assets to facilitate their deployment in the most productive uses. It is a matter of concern that financial savings as a percentage of GDP have declined recently. In times of uncertainty, I recognise that doubts often arise regarding the likely real returns on financial assets. Individuals tend to prefer physical assets like gold or investment in real estate. This is to some extent due to the macroeconomic difficulties we have experienced over the past two years. It is important to reverse this trend and I am confident that under the leadership of my distinguished colleague P. Chidambaram we are and we will take all necessary steps in this regard.

For mobilising savings into productive uses, retail investors must have the incentive to invest in financial assets such as securities, insurance products, banking and pension products. The Government and the financial sector regulators both have to take action to ensure this outcome. The moderation of inflation we are seeing will help this process. The inflation indexed bonds announced by the Finance Minister in the Budget for this year and the recent measures announced by SEBI to encourage small investors to participate in the securities market are other important efforts in this direction.

One of our problems is that the majority of Indian households do not participate in our financial markets. A recent study showed that the distribution of participation is also un-even across the country, with 55 per cent of all investors coming from the dynamic western region of our country. Hence, the mobilization of household savings into productive investment in the capital market must be a key goal for all actors in our financial sector, including SEBI.

SEBI can also make a vital contribution to the revival of the economy and towards laying the foundations for more rapid growth by facilitating infrastructure related investment. India needs infrastructure funding of about 1 trillion US dollars in the period 2012 to 2017. Out of this, about 50 percent would have to be met by the private sector and our financial institutions. I would urge SEBI to take a lead in ensuring that infra debt funds (IDFs) are established and that they face a supportive regulatory environment.

I also understand that SEBI has been working to make it easier for foreign investors such as sovereign wealth funds, university funds and pension funds to invest in our country. This is an area which needs priority attention, particularly in view of the current macro-economic environment in our country. I would urge SEBI to quickly bring to fruition the initiatives that are already underway in this regard.

The equity market in our country remains disproportionately focused on large-cap firms. Many mid cap and small tier companies are crowded out by their larger counterparts while seeking public capital. For our growth story to be truly sustainable in the years to come, small and medium enterprises would need to become a key segment of the Indian economy. They must be facilitated and helped to grow and expand with greater ease. I am very happy that SEBI has been making efforts towards enhancing access of mid-cap and small tier companies to capital markets. I hope to see more such efforts in the future.

A weakness in our financial system relates to the market for corporate debt. While the market for government debt is very large, the market for corporate debt has yet to develop as it should. It is not large enough and not liquid enough. To some extent the reduction in the fiscal deficit is a pre-condition for this development since sovereign debt often crowds out private debt. Efforts are being made to reduce the fiscal deficit and as we succeed we can expect the corporate debt markets to expand. But we need other initiatives also to help this process.

SEBI has issued regulations on issuance, listing and trading of debt securities to encourage mobilization of resources through the public issuance of debt. While creating a dedicated debt segment in stock exchanges will ensure greater institutional participation in trading, I would urge SEBI to ensure that good quality debt issuances are encouraged and a larger number of corporates access the debt market for financing.

The size and sophistication of the Indian securities market has been increasing at a very rapid pace. Every day, we see the development of new products with greater complexity than ever before. Developments in technology have resulted in speedier trading processes. Simultaneously, the number of entities that SEBI needs to regulate continues to increase. All this points to the need for SEBI to constantly upgrade and improve. It is only by building its human and technological capabilities that SEBI can fulfil its mandate of delivering strong and effective enforcement. A key indicator of SEBI`s future effectiveness will be its ability to root out the hard-to-define but extremely pernicious disease of insider trading.

I am happy that SEBI has over the years nurtured and supported under its auspices the National Institute of Securities Markets (NISM) to promote securities market education and research. It is also heartening to note that the Government of Maharashtra has allotted 70 acres of land for the new campus of NISM at Pathalganga, Navi Mumbai. The NISM will have, a state-of the art residential campus catering to 1,000 students at a time. The Institute is expected to play a pivotal role in implementing the National Strategy for Financial Education (NSFE).

Regulation of the securities market is a complex exercise. In the ultimate analysis, such regulation should be guided by the need to increase transparency and lead to higher investments being channelized into productive endeavours, which strengthen our economy. SEBI as a regulator has the responsibility to ensure that this outcome is achieved, while at the same time ensuring that the interests of investors and other stakeholders in the securities market are effectively protected. Our Government remains committed to doing everything that is needed to strengthen SEBI so that it can deliver even more effective enforcement.

I commend SEBI for its stellar performance during the 25 years, but I venture to think that the best is yet to come and I convey my very best wishes to Chairman Shri Sinha and all his colleagues and all those ladies and gentlemen, who have been associated in one way or the other with this wonderful and very productive institution of the financial system of our country.