Role of Capital Market on The Development of Industry In India | Capital Market in India
Before independence, India’s capital market was quite underdeveloped. At that time Indians were not enthusiastic about investing capital in industry and commerce. But India’s capital market has changed considerably since independence. The government’s investment efforts have helped tremendously in bringing about this change. At present, the importance of the capital market in the development of India’s industry and commerce is immense. In the growth of industry and commerce.
The importance of capital market are:
1. Growth of Fixed Capita Establishment
Establishment, ex-pats, ion, and maintenance of industrial and commercial establishments require a great deal of fixed capital. Apart from this, the modernization of production also requires fixed capital. Currently, in the era of globalization, it is not possible to produce world-class products without using modern technology. India’s capital market helps in providing fixed capital to manufacturing firms. However, to the nature of the compounder, this market is different, and their working methods are also different. For example, although the stock market included in the capital market does not directly provide capital, they facilitate the investment of capital in business by creating the opportunity to buy and sell shares, debentures, and government bonds. –
2. Supply of Loan – Capital:
Long-term loans are often required for industrial expansion. Only the capital market can meet this long-term debt problem. Currently, due to expansion the of the capital market, even small investors can enter this market. For which the capital market collects a large part of the country’s savings and gives it to industrial enterprises as long-term loans. In other words, the importance of the capital market in the provision the o the capital tax for the development of the industry is immense.
3. Reduction of Risk:
Generally, long-term bonds are much riskier than short-term bonds. But nowadays it is possible to know the change in the price of shares and debentures in the stock market at any time through the electronic system. As a result, investors can increase and decrease the amount of investment as the needed stock market is included in the capital market thus maintaining the flow of investment by reducing risk.
4. Increase in Productivity stock
The stock market is a suitable investment area for savings. In the absence of a stock market, investors had to roam around in search of suitable investment areas. The stock market encourages investors to save by finding that niche. And this accumulated money is invested in industry and commerce. As a result productivity increases. If the capital market or the members of the capital market were not active, the productivity of industry and commerce would be hampered.
5. Help to Government with the Development of Industry:
The capital market plays an important role in raising funds for the government by selling the debt securities of the public and private sectors. The capital market helps in raising the funds required to implement the programs undertaken for industrial development in the various Five Year Plans.
6. Aid to Industry:
Various long-term lending institutions belonging to capital markets help industrial enterprises in various ways apart from loans. Eg – Capital market firms act as guarantors when borrowing institutions take loans. Many of the share and debenture holders are stock market savvy. As a result, the new company can raise capital by selling shares and debentures with the help of these borrowers.
7. Increase of Goodwill and Status of Industry:
Stock market-listed shares are mentioned in newspapers and s, TV. As a result, the name of the institutes are spread, and the reputation and prestige of the institute. In a developing country like India, the importance of capital markets is immense in the development and growth of industry and commerce.
4. Help to Establishment and Expansion of Industry and Commerce:
The establishment and expansion of industry and commerce require fixed capital. Capital markets meet the demand for such money. However, the structure of the capital market is different. Therefore, capital markets cannot always provide finance directly to industrial enterprises. Like the stock market. The stock market creates opportunities for capital supply by arranging the purchase and sale of shares, debentures, government investment security, etc.
9. Help to Build up the Huge Amount Fund :
A lot of money is needed for the development of the industry. One or a few small industries cannot collectively raise huge amounts of money. Organized capital markets can pool the invested money of the public to form such funds.
10. Keep Intact the Flow of Capital:
The stock market, one of the members of the capital market, encourages investors to save. Investment funds are created out of the desire to save. The money of this fund is invested in various institutions as capital. Again the dividend or interest received from that institution is reinvested as capital in various institutions. So at. Marshall (A. Marshall) said, day after day, week after week, year after year, money from the stock market continues to flow silently in the form of capital to various institutions.