Capital market

Topics: Investment, Financial market, Stock market Pages: 85 (19799 words) Published: June 19, 2014
DEEPENING OF CAPITAL
MARKETS
Enabling Faster Economic Growth

December 2012

Contents
5 Foreword
6 Executive Summary
9 CAPITAL MARKETS CRITICAL FOR OVERALL ECONOMIC
GROWTH: THE MACRO–ECONOMIC POLICY CONUNDRUM
12 URGENT NEED FOR REFORMS IN INDIAN CAPITAL MARKETS
15 CAPITAL MARKETS — CRITICAL FOR OVERALL ECONOMIC
GROWTH
19 Finding the Pot of Gold at the End of the Rainbow —
Where is the Elusive Retail Investor in Equities
21 DEEPENING THE INDIAN CORPORATE BOND MARKET
23 KEY MONETARY REFORMS FOR THE DEVELOPMENT OF DEBT
MARKETS IN INDIA
28 DEBT CAPITAL MARKET — REFORMS REQUIRED IN
CORPORATE DEBT MARKET IN INDIA
3 1 Retail investment in corporate bonds — sustained,
focused efforts needed
3 4 Breathing Life into the Debt Markets
3 7 NATIONAL GOLD PLUS SCHEME — TURNING INDIANS’ GOLD

OBSESSION TO INDIA’S ADVANTAGE
4 0 ROLE OF PE IN THE INDIAN MARKET — THE INDIA PE MODEL
4 3 Nurturing Entrepreneurship Ecosystem in India —
Taking a Leaf out of JOBS Act

The Boston Consulting Group — Confederation of Indian Industry | 3

4 | Deepening of Capital Markets

FOREWORD
W

e are pleased to present this joint publication from the
Confederation of Indian Industry and the Boston Consulting
Group on ‘Deepening of Capital Markets: Enabling Faster Economic Growth’. This Publication explores the links between capital markets and economic growth underscoring the pivotal role they play in economic development and suggests measures to develop vibrant capital markets in the country.

Across the globe, the financial markets have been a long–standing determinant in the overall economic growth of any country. Stable and mature capital markets, both primary and secondary, create efficient capital raising opportunities for companies and also assist in channelizing domestic savings towards capital formation—fueling a nation’s economic growth. Though Indian capital markets have evolved dramatically over the past two decades, they have not yet accomplished the expanse witnessed in countries like US, UK, Korea, Malaysia or even Thailand. Uncertain outlook for the global economy and heightened risk of a much longer period of sluggish growth in developed countries have further amplified the need to raise capital from domestic sources to finance our country’s GDP growth. CII and BCG, with the help of members of CII National Committee on Capital Markets, have drawn up recommendations aimed at deepening capital markets by increasing participation from domestic institutions, FIIs and retail investors; creating markets which would help realize India’s inclusive growth aspirations and strengthen investors’ confidence in the face of the global financial crisis.

We are thankful to the authors for their contributions to the Publication, each of them an expert in their own right. We would also like to place on record our appreciation for Mr. Uday Kotak, Chairman of CII National Committee on Capital Markets for his guidance and leadership to the development of the agenda of the Committee as well as this Publication.

Chandrajit Banerjee
Director General
Confederation of Indian Industry

Alpesh Shah
Senior Partner and Director
The Boston Consulting Group

The Boston Consulting Group — Confederation of Indian Industry | 5

EXECUTIVE SUMMARY

C

apital markets are critical for economic growth. In fact, it has been observed that a developed capital market is a valuable national asset. Developed capital markets provide for some key macro economic benefits, including: a) higher economic growth, b) higher productivity and capital growth, c) higher employment, and d) a better developed financial sector. In addition, developed capital markets also provide some micro economic benefits, including: a) wealth creation for private investors, b) more flexible financing for companies, c) improvement of governance structures, d) higher cross border M&A power, and e) driving entrepreneurial...
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