Indian Capital Market
The Indian capital market is the market for long term loanable funds as distinct from money market which deals in short term funds. It refers to all the facilities and institutional arrangements for borrowing and lending "Term funds" medium term and long term funds. In principle capital market loans are used by industries mainly for fixed investment. It does not deal in capital goods, but is concerned with raising money capital for purpose of investment.
The Indian capital market is divided into gilt-edged market refers to the market for government and semi-government securities, backed by the RBI. The securities traded in this market are stable in value and are much sought after by banks and other institutions.
The industrial securities market refers to the market for shares and debentures of old and new companies. This market is further divided into the new issue market and old capital market meaning the stock exchange. The new issue market refers to the raising of new capital in the form of shares and debentures, whereas the old capital market deals with securities already issued by companies.
The capital market is also divided into primary capital market and secondary capital market. The primary market refers to the new issues market, which related to the issue of shares, preference shares and debentures of non-government public sector bonds. The secondary market on the other hand is the market for old and already issued securities. The secondary capital market is composed of industrial security market or the stock exchange in which industrial securities are bought and sold and the gilt-edged market in which the government and semi-government securities are traded.
Growth in Indian Capital Market
Indian Capital Market before Independence:
Indian capital market was hardly existent in the pre independence times. Agriculture was the mainstay of economy but there was hardly any long term lending to agricultural sector. Similarly the growth of industrial securities market was very much hampered since there were very few companies and the number of securities traded in the stock exchanges was even smaller. Indian capital market was dominated by gilt-edged market for government and semi-government securities. Individual investors were very few in number and that too were limited to the affluent classes in the urban and rural areas. Last but not the least, there were no specialised intermediaries and agencies to mobilise the savings of the public and channelise them to investment.
Indian Capital Market after Independence
Since Independence, the Indian capital market has made widespread growth in all the areas as reflected by increased volume of savings and investments in 1951, the number of joint stock companies (Which is a very important indicator of the growth of capital market) was 28,500 both public limited and private limited companies with a paid up capital of Rs. 775 crore, which in 1990 stood at 50,000 companies with a paid up capital of Rs. 20,000 crore. The rate of growth of investment has been phenomenal in recent years, in keeping with the accelerated tempo of development of the Indian economy under the impetus of the five year plan.
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