Concerned over India's debt market not fully taking off, Prime Minister Manmohan Singh on Friday stressed the need to step up financial sector reform, for which the government will soon forge a political consensus.

"We need to reform financial sector further if we are to have a larger debt market. We need to promote widely held pension fund system. We need a much larger insurance sector with a higher capital base and more diverse products," Singh said after inaugurating the new building of market regulator, Securities and Exchange Board of India in Mumbai.

If India has to achieve the ambitious 8-10 per cent growth, "we need investment of a high order. These would be possible by making our financial markets more efficient, more competitive and more global," he said.

"We may currently be lacking a consensus on the needed reforms. However, I am confident that we will soon be able to forge a consensus on taking the reforms forward," he said apparently referring to stiff resistance to economic reforms from the Left parties.

Asking market regulator Sebi to fully protect the interests of investors, Singh said he was happy that urgency was being given to comprehensively amend the Sebi Act to create appropriate investors' protection fund as well as further empowering the market regulator to address issues impacting investors' interest.

Noting that good market regulation could further ensure that engines of growth were allowed to run at full throttle, Singh said there was no space for manipulators in the system.

The securities market regulation has evolved in the country to include three principal objectives -- fair, efficient and transparent markets; investor protection and reduction of systemic risk, he said.

While appreciating Sebi's efficiency in shouldering the responsibility of a regulator, he however, felt that the market regulator was somewhat handicapped in its efforts to promote investor education due to lack of access to a suitable investors' protection fund.

Highlighting the need for stepping up the financial sector reforms, Singh said it was these, which would generate the necessary long-term funds in a debt market and make available resources for the investment need of the country.

The financial sector has now come of age in the country even though there were a number of issues, which needed to be resolved even if they were controversial, Singh said.

There was a need to encourage discussion and debate that result in furthering "our collective understanding. This is the basis of ensuring a healthy progress... this debate is extremely important for all policy makers," he said.

Singh said capital markets were not about equities alone. The bulk of the transactions in the markets of advanced nations were debt securities.

"Ever since the Asian currency crisis in the late 1990s, it has come to be accepted that a lively market in corporate securities helps the banking system to accurately price current and future assets. This helps mitigate risk," he said.

Elaborating on the investor education fund, Singh said Finance Minister P Chidambaram has already announced such a fund in the budget, which is to be financed out of the fines and penalties levied.

The debt markets in India have not quite delivered on the expectations, he said emphasising that "we need to make efforts to understand why the debt market has not taken off so as to take necessary policy measures.

Mumbai has the potential to be regional financial centre, Singh said adding, it was already the financial capital of India. In this context, the establishment of the new Sebi Bhavan was a step in the right direction, he added.

"I am not only hopeful, but also confident that Sebi will scale new heights in establishing a world-class regulator regime", Singh said.

While the Indian capital market has come a long way since 1992, when it was opened, the importance of stock market in the pricing of risk and opportunity was recognised as essential for financial stability, he said.

"Financial markets are more susceptible than other markets to asymmetric information. Such asymmetry encourages non-transparency and creates opportunities for excessive profiteering," he said adding it discourages widespread participation and market manipulation.