In a budget that embraces proposals to enhance the economy’s “aspirational growth”, the finance minister has outlined ambitious plans to deepen the debt market — a move that, inter alia, aims at offering smarter alternatives for the investor fraternity.

The government, in keeping with its policy to leverage exchange traded funds (ETFs), has laid out a strategy to introduce a new debt ETF, primarily comprising government securities.

The proposed ETF will add to the arsenal of investors, big and small. Retail investors, many of whom are constrained because of a lack of superior options, are likely to gain particularly.

The same will apply to certain categories of institutional investors with long-term objectives. Pension funds, for instance, are expected to adopt a positive stance.

The government has supported a number of ETFs in recent times. Very recently, Bharat Bond ETF was introduced as an open-end, target-maturity fund based on the Nifty Bharat Bond Index.

The fund reportedly mobilised Rs 12,000 crore or so. More than 55,000 retail investors are said to have participated in it.

The FM’s largesse on the debt market front is made up of three constituents. One, certain categories of g-secs will be opened fully for the non-resident community; these are available to domestic investors too.

Two, for foreign portfolio investment in corporate bonds, the limit will stand augmented to 15 per cent from 9 per cent of outstanding stock of such bonds.

Three, the government will widen the scope of credit default swaps (CDS). Suitable legislation for netting of financial contracts in the CDS market will be devised soon.

The government, which has correctly identified the need for a “reliable and robust” financial sector (the FM’s words) as critical to the economy, has underscored its belief in the evolving character of the country’s financial architecture.

Yet, while the budget spells out the significance of capital inflows into the financial system, the FM’s views may be seen in the context of the latest set of negatives.The latter currently points towards a multi-year low for the economy.

Union Budget 2020 has laid considerable emphasis on infrastructure-related investments. The FM has, in this context, referred to a significant requisite: a financial pipeline of more than Rs 1,00,000crore.

This will, over a period of time, unleash a spate of debt-mobilisation initiatives, which, in turn, will lead to newer and more diverse options for investors.

The proposed debt ETF, I strongly feel, can be devised as a starting point or, indeed, as a trigger for much bigger things to come.

A first of many momentous opportunities that can provide even ordinary investors with efficient, contemporary alternatives. Not a humdrum open-end debt fund with its usual portfolio of g-secs and other income-bearing securities. On the contrary, a robust index-oriented fund listed on the securities market. And it will be a great thing if an exclusive tax sop of sorts can be given to debt ETF investors.

But, well, that I leave to the finance minister to consider.

Nilanjan Dey is director of Wishlist Capital Advisors