Importance of Capital Market for the Economic Development of India

Topics: Investment, Stock exchange, Stock market Pages: 2 (644 words) Published: February 6, 2013
Importance of capital market for the economic development of India
The capital market is the market for securities, where
Companies and governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. A nation's capital market includes such financial institutions as banks, insurance companies, and stock exchanges that channel long-term investment funds to commercial and industrial borrowers. Unlike the money market, on which lending is ordinarily short term, the capital market typically finances fixed investments like those in buildings and machinery.

Nature and Constituents:
The capital market consists of number of individuals and institutions (including the government) that canalize the supply and demand for longterm capital and claims on capital. The stock exchange, commercial banks, co-operative banks, saving banks, development banks, insurance companies, investment trust or companies, etc., are important constituents of the capital markets.

The capital market, like the money market, has three important Components, namely the suppliers of loanable funds, the borrowers and the Intermediaries who deal with the leaders on the one hand and the Borrowers on the other.

 The demand for capital comes mostly from agriculture, industry, trade The government. The predominant form of industrial organization developed Capital Market becomes a necessary infrastructure for fast industrialization,and hence its important for the economy because india is a land if agriculture where more than 70 % of population depends upon agriculture and as India is also an developing nation so,industrialization is must necessary

In this topic we have discussed that the development of stock market must contributes to economic growth both directly and indirectly. Hence stock market plays an important role in the economy of a country. Following the direct channel, we show that market liquidity has a positive impact on...
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