Undeveloped corporate debt market is a weakness in India's financial system and high fiscal deficit is further complicating the problem, Prime Minister Manmohan Singh said Friday.

"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," he said.

Manmohan said fiscal deficit must be brought down, as it was a pre-condition to make corporate debt market vibrant.

"To some extent, the reduction in the fiscal deficit is a pre-condition for this development since sovereign debt often crowds out private debt," he said.

While addressing the silver jubilee celebration of the Securities and Exchange Board of India (SEBI), the prime minister said his government has been taking measures to curb fiscal deficit and develop the corporate debt market.

"Efforts are being made to reduce the fiscal deficit, and as we succeed we can expect the corporate debt markets to expand," he said.

The government targets to bring down fiscal deficit to 4.8 percent of the country's gross domestic product (GDP) in the current financial year as compared to 5.2 percent recorded in the

PM asks SEBI to stop insider trading 

He asked the capital market regulator SEBI to root out the "pernicious disease" of insider trading, saying the future effectiveness of the institution would depend on this.

"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," he added.

Manmohan Singh said the size and sophistication of the Indian securities market were 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," he said.

"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," the prime minister added.

Speaking on the occasion, Finance Minister P. Chidambaram asked SEBI to work fearlessly to protect the interests of small investors.

"Be a fearless regulator. Bend before no one, bow before no one," Chidambaram said.

"Win confidence of small investors. Its when a small investor says my money is safe in the financial market because I have SEBI watching over my money, that is the day when SEBI would have achieved its objective," the finance minister said.