This refers to your editorial, ‘Bond boom’ (September 20). The domination of the bond market is due to the bad loans issues faced by banks. In India bond borrowing is viewed as an alternative source of finance next only to bank credit. Banks can view this as an opportunity to fund small and medium industrial sectors that were denied credit as the corporate bond market is dominated by institutional investors and big private players.
Further, Indian bond markets are not deep compared to international markets. A vibrant bond market should have a trading element in it calling for the involvement of derivative products to insulate them from interest rate and currency fluctuations. The current transition of corporates to the bond route is temporary till banks resolve their issues. As a precaution the RBI should ensure that delinquent companies with stressed balance sheets are not allowed bond borrowing.
Srinivasan Velamur
Chennai
The rush for bond buying is genuine. Interest rates offered by bonds are more attractive than what’s offered by banks, and with credit rating advantage the pricing and interest rate risk is almost eliminated. Secondly foreign investors have also swarmed the bond market.
Domestic institutional investors who were till now going for government bonds are also taking recourse to bonds. But it will take time for the bond market to compete with banks.
RK Arya
Faridabad, Haryana
The real challenge
With reference to ‘Shopping for a new market’ by Paran Balakrishnan (September 20), though every foreign retail chain is not as lucky as H&M, things are moving apace for many retail chains. The real challenge will come when they venture into tier three or smaller towns where pricing is a big decision-making factor.
Bal Govind
Noida, Uttar Pradesh
The danger of futility
This refers to ‘Highly objectionable’ by Jinoy Jose P (From the Viewsroom, September 20). If the political leadership decides to do things arbitrarily or in violation of established norms and practices, a time will come when people will feel helpless and not even appeal against them.
The frustration emanates from the sense of futility in fighting the establishment. The Centre has tasted success in withdrawing the pension scheme for government employees and is now confident about taking the Aadhaar imposition forward.
MG Warrier
Mumbai
What’s the problem?
This is with reference to ‘Turnover tax on tech giants is a bad idea’ (September 20). It is bizarre that domestic cross-border tax laws in small EU nations have started ruffling the feathers of advanced nations like France and Germany.
Ireland which is known to have one of the lowest corporate tax rates in Europe has been able to attract major Silicon Valley tech companies over the last decade, and this has helped many of the companies set up major centres in that country. This has helped its domestic economy by drastically bringing down its unemployment rat , enhancing per-capita income, and purshing up real-estate demand and prices. This unconventional move is the legitimate sovereign domestic legislative right of that country and is no reason to arouse the indignation of Germany and France which have traditionally prospered through technical and technological innovation. Also, the equalisation tax is tantamount to legislative enforcement of a cartelisation of high taxes on US tech companies which don’t have competitors of comparable scale and repute in Europe. This flies in the face of the spirit of fair competition in Europe.
The move to indirectly encroach upon the sovereign jurisdictions of EU nations like Ireland smacks of desperation by the rest of the bloc to institutionally stymie underdog EU countries that have started shining with economic fortunes on account of unconventional, legitimate, moves that have given them a competitive advantage.
Aravind Sridhar
Bengaluru
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