India's new finance minister has said the country's economy is sound but action must be taken to instil greater confidence in foreign investors.

On his first day in office Jaswant Singh described India's economic growth rate of 5.4% in 2001-2 as "no mean achievement".

You must demand that the company you invest in is compliant with the standards

Ravi Narain, National Stock Exchange of India

But he said there was "a need to put more money in citizens' pockets" to spur demand in the economy.

Tension between India and Pakistan over Kashmir has deterred potential investors but with the tension now easing Mr Singh is expected to try to woo investors back to the country.

Regulatory stick

Investor confidence in India has also been hit by a string of scandals that rocked the stock market last year.

But Ravi Narain, managing director of the National Stock Exchange of India, told the BBC's World Business Report that recent events in the US showed nowhere was immune to such problems.

Mr Narain said the US scandals showed that monitoring companies to ensure they complied with set standards was more difficult than previously realised.

"All of the regulators around the globe, but more importantly the market participants, must get involved," he said.

Mr Narain said it was not enough to rely on the regulatory stick to ensure companies worked to the rules.

"It is far more important to work with the... investors and say, look you fellows will get hurt, and therefore you must demand that the company you invest in is actually fully compliant with the standards."