Comparative Analysis Of Stock Market Development And Economic Growth.docx

COMPARATIVE ANALYSIS OF STOCK MARKET DEVELOPMENT & ECONOMIC GROWTH

FINAL YEAR RESEARCH PROJECT REPORT Submitted in partial fulfillment of

MASTER of BUSINESS ADMINISTRATION at

University School of Business CHANDIGARH UNIVERSITY, GHARUAN (2017-2019)

Supervised by

Submitted by

MS SHEENA CHOPRA

RAJESH THAKUR UID-17MBA2038

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DECLARATION PROJECT IS ORIGINAL WORK

I declare that this project titled “COMPARATIVE ANALYSIS OF STOCK MARKET DEVELOPMENT & ECONOMIC GROWTH” has been worked on, drafted and finalized by RAJESH THAKUR, 17MBA2038, student of MBA 4th semester of the batch 20172019. This project is an original piece of work and not copied or plagiarized from any other source of literature, review article or published reference in this regard. This is purely my Final Research Project Report being submitted in partial fulfillment of the degree of Master in Business Administration from University School of Business, Chandigarh University and has not been submitted for the reward of any certificate, diploma, degree, fellowship with any college / university nor educational institute before this.

In case any part of this work is reported as copied from any another source, I shall be solely responsible for the same and will be answerable for any action taken in this regard.

Students’ Signature RAJESH THAKUR 17MBA2038 Date:

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CERTIFICATE This is to certify that, Mr. RAJESH THAKUR, UID No.17MBA2038, a student of MBA 4th SEMESTER, with University School of Business, Chandigarh University, Gharuan, Punjab, has

successfully completed his final research project from

04/02/2019

to

05/04/2019 and his report is titled “COMPARATIVE ANALYSIS OF STOCK MARKET DEVELOPMENT & ECONOMIC GROWTH”. Student has carried out the work satisfactorily under my supervision.

According to the declaration submitted by the student, the report is an authentic work and may be considered as partial fulfillment towards course credits

I wish him success in life.

Sign of Faculty Supervisor

(Ms SHEENA CHOPRA)

ASSISTANT PROFESSOR

Date:

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ACKNOWLEDGEMENT

It is my proud privilege to release the feelings of my gratitude to several persons who helped me directly or indirectly to conduct this project work. I express my heart full indebtness and owe a deep sense of gratitude to my teacher and my faculty guide Ms. Sheena Chopra, Assistant Professor, University School of Business, Chandigarh University, Gharuan (Punjab) for her sincere guidance and inspiration in completing this project. I am also extremely thankful to all the faculty members who have positively helped me in carrying out the project successfully. I also thank all my friends who more or less contributed to the preparation of this project. I will be always indebted to them.

Thanking You

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ABSTRACT This study aimed at finding the causal relationship between stock market development and economic growth in India. The development of a stock market is determined by a number of factors that include market capitalization, liquidity, regulation and trades. This paper sought to investigate the causal relation between stock market capitalization, turnover and economic growth. Previous studies done on Indian stock markets characterize them to be small and hindered by various factors such as thin trading and illiquidity. These studies also point out that countries with well developed financial markets have a better level of per capita income than those with less developed markets. This notion is also confirmed by theory which states that there is a big role that financial markets (stock markets) play in boosting economic activity through provision of long-term capital for projects and risk diversification The link between stock market development and economic activity has always been the subject of considerable debate in the field of economics and it raises empirical question whether stock market development influences economic activity or whether it is a consequence of increased economic activity. This study attempts to investigate the direction of causality between stock market development and economic growth in the Indian context. Using the co integration and causality tests for the period June 1991 to 2019, the study confirms a well defined long-run equilibrium relationship between the stock market development indicators and economic growth in India. The empirical results show bidirectional causality between market capitalization and economic growth and unidirectional causality from turnover ratio to economic growth in the long-run and short-run By and large, it can be inferred that the stock market development indicators viz. market capitalization and turnover ratio have a positive influence on economic growth in India.

There has not been a lot of work done on causal relationship between stock market development and economic growth in India. Few studies show that traditionally the economy follows the stock market in terms of capitalization and there is somewhat lack of consensus on liquidity. The Indian stock market has made various strides in improving some of the aspects that are deemed to result in the development of the stock market and this has seen the increase in the number of listed firms on the bourse and also the improvement of regulatory laws that govern trading and disclosures. This study therefore aims to use the Granger test for causality on stock market capitalization to GDP ratio which represents the size of growth of 5|Page

the stock market, the stock market turnover ratio and GDP growth in India over the period 1993-2019 The results show a strong positive relationship between stock market development and economic growth stemming from a one sided causal relation from market capitalization to economic growth while market liquidity (stock market turnover ratio) showed a non causal effect to economic growth. With the results found it is recommended that measures that boost the size of the stock market should be implemented so as to raise economic activity as the stock market in India is seen to be forward looking and a proponent of long run economic growth.

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TABLE OF CONTENT

S.NO TOPIC 1

TITLE PAGE

2

DECLEARATION

3

PREFACE

4

DECLEARATION

PAGE NO

5 6

CHAPTER 1

7

INTRODUCTION

8

STOCK MARKET OF INDIA

1-14

9

INTRODUCTION OF INDIAN ECONOMY

15-33

10 11

CHAPTER 2

12

LITERATURE REVIEW

34-36

CHAPTER 3 RESEARCH METHODOLOGY

37-42

CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

43-57

13 14 15 16 17 18 19 20

CHAPTER 5

21

FINDINGS

58

CHAPTER 6 CONCLUSION

59

22 23 24 25 26 27 28

CHAPTER 7 RECOMMENDATION BIBLIOGRPHY

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60 61

CHAPTER 1

STOCK MARKET OF INDIA

INTRODUCTION Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors’ don’t have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet. CONCEPT OF STOCK EXCHANGE The Securities Contracts (Regulation) Act, 1956, has defined Stock Exchange as an "association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in Securities".

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Stock exchange as an organized security market provides marketability and price continuity for shares and helps in a fair evaluation of securities in terms of their intrinsic worth. Thus it helps orderly flow and distribution of savings between different types of investments. This institution performs an important part in the economic life of a country, acting as a free market for securities where prices are determined by the forces of supply and demand. Apart from the above basic function it also assists in mobilizing funds for the Government and the Industry and to supply a channel for the investment of savings in the performance of its functions.

The Stock Exchanges in India as elsewhere have a vital role to play in the development of the country in general and industrial growth of companies in the private sector in particular and helps the Government to raise internal resources for the implementation of various development programmes in the public sector. As a segment of the capital market it performs an important function in mobilizing and channelizing resources which remain otherwise scattered. Thus the Stock Exchanges tap the new resources and stimulate a broad based investment in the capital structure of industries.

A well developed and healthy stock exchange can be and should be an important institution in building up a property base along with a socialist in India with broader distribution of wealth and income. Thus Stock Exchange is a vital organ in a modern society. Without a stock exchange a modern democratic economy cannot exist. The system of joint stock companies financed through the public investment as emerged has put the vast means of finances almost to entrepreneur’s needs. Indian

Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India

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Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as “The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers formed "The Ahmedabad Share and Stock Brokers' Association". 10 | P a g e

What the cotton textile industry was to Bombay and Ahmedabad, the jute industry was to Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange Association".

In the beginning of the twentieth century, the industrial revolution was on the way in India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company Limited in 1907, an important stage in industrial advancement under Indian enterprise was reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100 members. However, when boom faded, the number of members stood reduced from 100 to 3, by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a rapid increase in the number of textile mills and many plantation companies were floated. In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Punjab Stock Exchange Limited, which was incorporated in 1936. 11 | P a g e

Existing structure of the stock exchanges in India

The Act recognizes stock exchanges with different legal structure. Presently the stock exchanges which are recognized under the Securities Contracts (Regulation) Act in India could be segregated into two broad groups – 20 stock exchanges which were set up as companies, either limited by guarantees or by shares, and the 3 stock exchanges which are functioning as associations of persons (AOP) viz. BSE, Ahmedabad Stock Exchange and Indore Stock Exchange. The 20 stock exchanges which are companies are: the stock exchanges of Bangalore, Bhubaneswar, Calcutta, Cochin, Coimbatore, Delhi, Gauhati, Hyderabad, Interconnected SE, Jaipur, Ludhiana, Madras, Magadh, Managalore, NSE, Pune, OTCEI, Saurashtra-Kutch, Uttar Pradesh, and Vadodara. Of these, the stock exchanges of Ahmedabad, Bangalore, BSE, Calcutta, Delhi, Hyderabad, Madhya Pradesh, Madras and Gauhati were given permanent recognition by the Central Government at the time of setting up of these stock exchanges. Apart from NSE, all stock exchanges whether established as corporate bodies or Association of Persons (AOPs), are non-profit making organizations.

Powers that may be exercised by the Stock Exchange

The powers of the stock exchange are to be exercised as per provisions in its bye-law. As per SCRA Act any recognised stock exchange may, subject to the previous approval of the [Securities and Exchange Board of India make bye-laws for the regulation and control of contracts. The bye-laws can provide for the exercise of following powers by the stock exchange a. The opening and closing of markets and the regulation of the hours of trade; b. Set up a clearing house for the periodical settlement of contracts and differences there under, the delivery of and payment for securities, the passing on of delivery orders and the regulation and maintenance of such clearing house; 12 | P a g e

c. The regulation or prohibition of blank transfers;

d. The regulation, or prohibition of badlas or carry-over facilities;

e. The fixing, altering or postponing of days for settlements

f. The determination and declaration of market rates, including the opening, closing, highest and lowest rates for securities;

g. The terms, conditions and incidents of contracts, including the prescription of margin requirements, if any, and conditions relating thereto, and the forms of contracts in writing;

h. The regulation of the entering into, making, performance, rescission and termination, of contracts, including contracts between members or between a member and his constituent or between a member and a person who is not a member, and the consequences of default or insolvency on the part of a seller or buyer or intermediary, the consequences of a breach or omission by a seller or buyer, and the responsibility of members who are not parties to such contracts; The regulation of taravani business including the placing of limitations thereon; j. The listing of securities on the stock exchange, the inclusion of any security for the purpose of dealings and the suspension or withdrawal of any such securities.

k. The method and procedure for the settlement of claims or disputes, including settlement by arbitration;

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Indian Stock Exchanges - An Umbrella Growth The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump. But, in 1943, the situation changed radically, when India was fully mobilized as a supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities, those dealing in them found in the stock market as the only outlet for their activities. They were anxious to join the trade and their number was swelled by numerous others. Many new associations were constituted for the purpose and Stock Exchanges in all parts of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi Stock Exchanges Association Limited.

History

of

the

Indian

Stock

Market

The

Origin

One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history.

18th

East India Company was the dominant institution and by end of the century,

Century

business in its loan securities gained full momentum

1830's

Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader

14 | P a g e

1840's

Recognition from banks and merchants to about half a dozen brokers

1850's

Rapid development of commercial enterprise saw brokerage business attracting more people into the business

1860's

The number of brokers increased to 60

1860-61

The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India

1862-63

The number of brokers increased to about 200 to 250

1865

A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

Pre-Independence Scenario - Establishment of Different Stock Exchanges

1874

With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business.

1875

"The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay

1880's

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Development of cotton mills industry and set up of many others

Establishment of "The Ahmedabad Share and Stock Brokers' Association"

1894

1880

-

Sharp increase in share prices of jute industries in 1870's was followed by a

90's

boom in tea stocks and coal

1908

"The Calcutta Stock Exchange Association" was formed

1920

Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers.

1923

When recession followed, number of brokers came down to 3 and the Exchange was closed down

1934

Establishment of the Lahore Stock Exchange

1936

Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange

1937

Re-organization and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies

1940

Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established

1944

Establishment of "The Hyderabad Stock Exchange Limited"

1947

"Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"

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THE POST INDIAN SCENARIO The depression witnessed after the Independence led to closure of a lot of exchanges in the country. Lahore stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange was closed during partition of the country and later migrated to Delhi and merged with Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore, the well established exchanges, were recognized under the Act. Some of the members of the other Associations were required to be admitted by the recognized stock exchanges on a concessional basis, but acting on the principle of unitary control, all these pseudo stock exchanges were refused recognition by the Government of India and they thereupon ceased to function.

Thus, during early sixties there were eight recognized stock exchanges in India (mentioned above). The number virtually remained unchanged, for nearly two decades. During eighties, however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently 17 | P a g e

established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock exchanges in India excluding the Over the Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. POST –REFORMS STOCK MARKET SCENARIO

After the initiation of reforms in 1991, the Indian secondary market now has a three –tier form. •Regional

stock

•

National

•

Over

exchange

stock the

exchange

Exchange

of

(NSE)

India

(OTCEI)

The NSE was set up in 1994 .It was the first modern stock exchange to bring in new technology

,

new

trading

practices

,

new

institutions

,

and

new

products.

The OTCEI was set up in 1992 as a stock exchange providing small and medium sized companies

the

means

to

generate

capital.

In all, there are at present, 23 stock exchange in India –19 regional stock exchanges, BSE, NSE,

OTCEI,

and

the

interconnected

stock

exchange

of

India

(ISE)

The 19 regional stock exchanges are located at Ahmedabad, Bangalore, Bhubaneswar, Kolkata, Cochin, Coimbatore, Delhi, Guwahati, Hydrabad, Indore, Jaipur, Kanpur, Ludhiana, Chennai, Mangalore, Pune, Patna, Rajkot, and Vadodara. They operate under the rules, by laws and regulations approved by the government and SEBI.

REFORMS

IN

INDIAN

CAPITAL

MARKET

The 1991_92 securities scam prompted the government to increases the pace of reforms in the capital market. Several measures have been undertaken since then in both the primary and secondary

market.

Primary market reforms: Security exchange Board of India was set up in early 1988 as a non statutory body was given power in January 1992.The two objective mandated in the SEBI act are

investor

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protection

and

orderly

development

of

the

capital

market.

• The SEBI has introduced various guidelines and regulatory measures for capital market in India. The issuing company is required to make material disclosure about the risk factors, in their

offer

document

and

also

to

get

their

debt

instrument

rated.

• The infrastructure of the primary capital market has been fairly diversified over the years with the setting up of a large number of merchant bankers, investment and consulting agencies

registrars

to

the

issue

and

so

on.

• The primary capital market has widened and deepened with public sector banks , financial institutions

,

and

public

sector

enterprises

in

• Three new stock exchange at the national level were set up in the1990s. There are over the counter Exchange of India (1992), National stock Exchange of India (1994), and Inter – connected the infrastructure and power sectors increasingly raising resources from the market both

way

of

debt

and

equity.

• Companies are now required to disclose all materials fact and specific risk factor associated with

their

project

while

making

public

issue

process.

• SEBI has also introduced a code of advertisement for public issues for ensuring fair and true picture. • In order to reduce the cost of issue, the underwriting issue has been made optional subject to the condition that if the subscription is less than 90% of the amount offered, the entire amount

collected

would

Secondary

be

refunded

to

the

market

investor. reforms:

• The open outcry trading system, prevalent till 1995, was replaced by the online screen based trading system (SBTS). In all 23 stock exchanges have approximately 8000, trading terminals spread

all

over

the

country.

Stock

Exchange

of

India

(1999).

• Trading and settlement cycle were uniformly trimmed from 14 days to 7days in all stock exchanges

in

Aug

1996.

• The settlement cycle for all securities was shorted from T+5 to T+3 days with effect from 19 | P a g e

April1,2002. • With a view to maintaining integrity and ensuring safety of the market, various risk containment measures have been initiated such as the mark to mark margin system, intra – day trading limit, exposure limit, and setting up of trade / settlement guarantee fund. • To enhance the level of investor protection, the process of dematerialization of securities through the depository system and their transfer through electronic book entry is pursued vigorously. For this purpose National Securities Depository Limited and central Depository service was set up Issuing company is required to make continuing disclosure under the listingagreement. • One of the major reforms in the secondary market is the measure to improve corporate governance .this is a set of system and process designed to protect the interest of stake holders. • The insider trading regulations have been formulated prohibiting insider trading and making it a criminal offence, punishable in accordance with the provision under the SEBI Act, 1992. • In February 1999, trading terminal was allowed to be set up abroad for facilitating market participation by nonresidents. Internet trading was permitted in February 2000. How do the debt markets impact the economy? 1. Increased funds for implementation of government development plans. The government can raise funds at lower costs by issuing government securities. 2. Conducive to implementation of a monetary policy. 3. Less risk compared to the equity markets, encouraging low-risk investments. This leads to inflow of funds into the economy. 4. Higher liquidity and control over credit.

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5. Opportunity for investors to diversify their investment portfolio. 6. Better corporate governance. 7. Improved transparency because of stringent disclosure norms and auditing requirements.

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INTRODUCTION OF INDIAN ECONOMY PRE LIBERALISED ECONOMY

Early Indian Economy Indian economy in the early period was a self sufficient economy comprising of several villages. Indian villages produced and met their requirement according to division of labour and their economic activity was restricted to village economy. Barter system prevailed as an exchange mechanism. Basically, the primary activity was agriculture. Other services like carpentry, weaving, hair dressing, etc. were offered by labourers who extended their services based on hereditary. They received their wages as food products. In short, Indian villages functioned as an independent republics and the only interference was from the King for whom they paid taxes in kind. Thus, India had happy villages. Prior to the British rule, religion, system of the society and king’s law influenced the economy to a great extent. There prevailed caste system which decided the division of labour for the benefit of the society’s economy. Further, the prevalence of joint-family system helped them to pool their resources for their individual family benefit and also for the benefit of the society. Another advantage of the joint-family system was that the cultivable lands were not fragmented, yielding to better economic gains.

Another influencer of early Indian economy was the Hindu religion. The religious canters also functioned as Indian trade centers. For example, major pilgrimage spots like Nasik, Allahabad, Varanasi, etc. also functioned as centers of commerce and trade. Many trade and commerce activities were linked to the religious festivals and functions. In short, the Hindu religion acted as an indirect catalyst for the Indian economy.

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One of the major industries in early India was textile. Handicrafts were also part of the Indian industrial activity. Indian textile products like shawls, dhotis, dopattas, woolen products, cotton goods, etc. and handicraft products were exported to overseas markets, such as Egypt, South East Asia, Greece, etc. It is worth noting that when Europe (birth place of modern industrialism) was inhabited by uncivilized people, India was very popular for its craftsmanship and rich economy.

Indian Economy during Colonialism

Indian land had been invaded and ruled by many outsiders, amongst which the British regime was considered very important. British East India Company entered India in 1757 through the Battle of Plessey and the Crown took the complete administration during 1858. Politically, India was under the British rule for around two centuries and the Indian economy was significantly influenced during their rule. Indian culture and administration too underwent a major transition during British rule.

PRE-LIBERALIZATION POLICIES

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.

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Before the process of reform began in 1991, the government attempted to close the Indian economy to the outside world. The Indian currency, the rupee, was inconvertible and high tariffs and import licensing prevented foreign goods reaching the market. India also operated a system of central planning for the economy, in which firms required licenses to invest and develop. The labyrinthine bureaucracy often led to absurd restrictions — up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used. The government also prevented firms from lying off workers or closing factories. The central pillar of the policy was import substitution, the belief that India needed to rely on internal markets for development, not international trade — a belief generated by a mixture of socialism and the experience of colonial exploitation. Planning and the state, rather than markets, would determine how much investment was needed in which sectors. IMPACTS  The low annual growth rate of the economy of India before 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%. At the same time, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and in Taiwan by 12%.  Only four or five licences would be given for steel, power and communications. License owners built up huge powerful empires.  A huge public sector emerged. State-owned enterprises made large losses.  Infrastructure investment was poor because of the public sector monopoly.  License Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country" and corruption flourished under this system.

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Rajiv Gandhi government (1984-1989)  Government in the 80s, the government led by Rajiv Gandhi started light reforms. The slightly reduced License Raj and also promoted the growth of the telecommunications and software industries.  The Vishwanath Pratap Singh government (1989–1990) and Chandra Shekhar government (1990–1991) did not add any significant reforms.

Narasimha Rao government (1991-1996) Crisis The assassination of Prime minister Indira Gandhi in 1984, and later of her son Rajiv Gandhi in 1991 crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s. As of 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default, its central bank had refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports. A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout, gold was transferred to London as collateral, the Rupee devalued and economic reforms were forced upon India. That low point was the catalyst required to transform the economy through badly needed reforms to unshackle the economy. Controls started to be dismantled, tariffs, duties and taxes progressively lowered, state monopolies broken, the economy was opened to trade and investment, private sector enterprise and competition were 25 | P a g e

encouraged and globalization was slowly embraced. The reforms process continues today and is accepted by all political parties, but the speed is often held hostage by coalition politics and vested interests.

Reforms The Government of India headed by Narasimha Rao decided to usher in several reforms that are collectively termed as liberalization in the Indian media. Narasimha Rao appointed Manmohan Singh as a special economical advisor to implement liberalization. The reforms progressed furthest in the areas of opening up to foreign investment, reforming capital markets, deregulating domestic business, and reforming the trade regime. Liberalization has done away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Rao's government's goals were reducing the fiscal deficit, privatization of the public sector, and increasing investment in infrastructure. Trade reforms and changes in the regulation of foreign direct investment were introduced to open India to foreign trade while stabilizing external loans. Rao's finance minister, Manmohan Singh, an acclaimed economist, played a central role in implementing these reforms. New research suggests that the scope and pattern of these reforms in India's foreign investment and external trade sectors followed the Chinese experience with external economic reforms.  In the industrial sector, industrial licensing was cut, leaving only 18 industries subject to licensing. Industrial regulation was rationalized.  Abolishing in 1992 the Controller of Capital Issues which decided the prices and number of shares that firms could issue.  Introducing the SEBI Act of 1992 and the Security Laws (Amendment) which gave SEBI the legal authority to register and regulate all security market intermediaries. 26 | P a g e

 Starting in 1994 of the National Stock Exchange as a computer-based trading system which served as an instrument to leverage reforms of India's other stock exchanges. The NSE emerged as India's largest exchange by 1996.  Reducing tariffs from an average of 85 percent to 25 percent, and rolling back quantitative controls. (The rupee was made convertible on trade account.) Encouraging foreign direct investment by increasing the maximum limit on share of foreign capital in joint ventures from 40 to 51 percent with 100 percent foreign equity permitted in priority sectors.  Streamlining procedures for FDI approvals, and in at least 35 industries, automatically approving projects within the limits for foreign participation. Opening up in 1992 of India's equity markets to investment by foreign institutional investors and permitting Indian firms to raise capital on international markets by issuing Global Depository Receipts (GDRs).  Marginal tax rates were reduced.  Privatization of large, inefficient and loss-inducing government corporations was initiated.

LATER REFORMS

 Atal Bihari Vajpayee's administration surprised many by continuing reforms, when it was at the helm of affairs of India for five years.  The Vajpayee administration continued with privatization, reduction of taxes, a sound fiscal policy aimed at reducing deficits and debts and increased initiatives for public works.  The UF government attempted a progressive budget that encouraged reforms, but the 1997 Asian financial crisis and political instability created economic stagnation. 27 | P a g e

 Right to Information Act (2005)  Indo-US civilian nuclear agreement (2008)  Right to Education Bill (2008) Impact of reforms

The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from a minuscule US $132 million in 1991-92 to $5.3 billion in 1995-96. Cities like Gurgaon, Bangalore, Hyderabad, Pune and Ahmedabad have risen in prominence and economic importance, became centres of rising industries and destination for foreign investment and firms.

Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.

Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy. They expected favorable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system... The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage 28 | P a g e

industries was criticized by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers. The rate from 1947–80 was derisively referred to as the Hindu rate of growth, because of the unfavorable comparison with growth rates in other Asian countries, especially the "East Asian Tigers".

The Rockefeller Foundation's research in high-yielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution in India, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India. Famine in India, once accepted as inevitable, has not returned since the end of colonialism.

It is paradoxical that India is a rich country (in terms of enormous natural and man power resources) with poor people. India adopts a mixed economic model which is tending towards economic liberalization in order to attain self-reliance.

Indian economy is characterized by lower per capita income, mass unemployment and under employment, over-dependence of agriculture, over population, poor standard of living, low level of capital formation, low levels of health and education facilities, etc. Indian population, instead of being an asset, has most often proved to be a liability and economic distress. This calls for more attention by the Government in the upliftment of the population. Thus, any economic policy treatment in India will be viewed with a social mind frame.

During 1901, urban population which was at 10.8 per cent of total population has increased to 25.7 per cent during 1991. Further, almost the entire rural population of 1901 (213 million) lives in urban India during 1991 (218 million). This indicates the extent of migration. Savings and capital formation are very important for a country’s Economic development. The gross domestic savings which was at Rs 2544 crore in 1960-61 rose to Rs 157186 crore in 29 | P a g e

1992-93. The contribution of household sector to savings is the largest in India, followed by public sector and private corporate sector. The rate of saving s in India to GDP is not satisfactory due to several reasons, such as, low per capita income, poor performance of public sector enterprises, poor contribution of private sector players and untapped rural savings potential.

It is worth noting that the gross savings of corporate sector, for the period 1960-61 to 199293, indicates an annual average growth rate of 14.23 per cent. However, when the savings and capital formation in the private corporate sector are compared with the gross domestic savings and capital formation, it has remained at more or less the same proportion around one-eighth of the total domestic savings. This is an indication of the corporate sector’s dependence on household sector savings for its long term capital requirements, which has led to a broad based structure of share ownership pattern.

Indian economy has come a long way, especially after independence. Since independence, the structure of the Indian economy has gone through several changes, out of which sectoral contribution to the economy is the most vital one. The agricultural contribution to GDP is declining gradually as seen in the Table below. While the contribution of industrial sector has not improved to a great extend, the service sector’s contribution to GDP has notably increased. One of the main reasons for this change can be attributed to the economic policies of India.

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Sectoral Share in National Income (figures in percentage) 1970-71

1995-96

Agriculture

50

29

Industry

20

28

Service

30

43

It has to be noted that though the contribution of agriculture to GDP has declined, still majority of the population (around 67 per cent as per 1991 census) is depend on primary sector. This is the reason for the failure of many multinationals in India. They fail to notice this fact and over estimated the demand potential of their products.

SINCE 1991 Major improvements in educational standards across India have helped its economic rise. Shown here is the Indian School of Business at Hyderabad, ranked number 15 in global MBA rankings by the Financial Times of London in 2009.

In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India, which found it facing the prospect of defaulting on its loans. India asked for a $1.8 billion bailout loan from IMF, which in return demanded reforms.

In response, Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalization of 1991. The reforms did away with the Licence Raj

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(investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.[55] Since then, the overall direction of liberalization has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. Since 1990 India has emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security.

While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007 by S&P and Moody's. In 2003, Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China. In 2009 India purchased 200 Tons of Gold for $6.7 Billion from IMF as a total role reversal from 1991.

Agriculture Agriculture is the back bone of Indian economy for several centuries. The importance of agriculture in Indian economy is prominently evident. Nearly 70 per cent of the population depends on agriculture either directly or indirectly for their living.

According to 1991 Census Report, over 67 per cent of the work force is still engaged in primary sector. However, employment in this sector is not wide spread. In other words, only 0.78 per cent of rural population (or 1.97 per cent of the rural work force) is employed in allied activities, such as, livestock, forestry, etc. Considering India’s wide natural resource

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potential (sea base, animal stock, etc.) this is a very negligible figure. Thus, there can be found great untapped employment opportunities for rural work force in the allied sector.

Indian agriculture is characterized by lack of technology, low productivity, under employment, multiplicity of crops, unequal distribution of land, predominance of small farmers, etc. INDUSTRY

Industrialization is vital for a country’s economic development. Indian industrial sector is characterized by under-utilization of resources, low capital formation, low level of technology, and lack of skilled man power and social attitudes of the population. Indian industrial development is also highly influenced by the political climate of India, the political philosophy of the ruling party, the attitude and culture of the political administrators and Indian Industrial Policies. Indian industry also depends highly on the attitudes and aspirations of the Indian man power and Indian society.

The economic structure of India follows a mixed economy. Thus, the functioning of duel sectors - public and private - exists in India. Public sector includes both public utility undertakings and public enterprises. Due to several factors, such as, low returns, long time lag, defense requirements, public utilities, large resource requirement, development of backward regions, development of infrastructure, etc. the Government had to invest in certain capital-intensive segments to share the burden of industrialization and to generate employment opportunities. However, most of the public sector undertakings do not perform well from the angle of profitability and/or efficiency for many reasons, like initial heavy costs, capital-intensive industries, large capacities, heavy social costs, low priced products, labour problems and high expense ratio, unprofessional manpower planning, etc.

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The role of private sector in Indian industrial development cannot be under stated. Private sector is also sharing Government’s burden in certain heavy investment ventures today, like infrastructure. This is due to the improved government policy towards private sector. The Indian Government has been form time to time changing its industrial policies to suit the economic and global environment in favor of industrial sector. Further, there can be found a trend towards taking advantage of the liberalized industrial policy frame work. This is vindicated by the various indicators of investment intentions. However, the private sector in India faces several obstacles: undue delay by the government authorities, restrains on capacity, over-dependence of public sector, price restrictions, small scale reservations, finance, etc.

Though private sector is facing many problems, its contribution to Indian economy is remarkable. For instance, India achieved a GDP growth rate of 7 per cent in 1995-96 for the first time since 1950, despite a low agricultural growth rate of 2.4 per cent. The major factor which contributed for this growth rate was achievement by the industrial sector which registered a growth rate of 12.1 per cent in 1995-96.

SERVICE AND INFRASTRUCTURE SECTOR

For any developing nation development of service and infrastructure segment is very important to reach its economic goals. India is successful in improving its service and infrastructure areas. It is very evident that the role of service sector in Indian economic development has increased by several notches from the fact that this sector which was contributing only around 20 per cent during independence is contributing over 43 per cent currently to India’s GDP.

Service and infrastructure sector is comprised of the following segments: Banking, Insurance, Transport, Telecom and Power. 34 | P a g e

Banking

Performance of the banking sector is considered as a proxy for the economy as a whole, due to banks' wide spectrum of exposure across industries. Unfortunately for India, the banking sector has historically remained under the impact of non-competitiveness, poor technology integration, high NPAs and grossly under productive manpower.

Banking sector in India has a wide mix, comprising of joint sector (scheduled and nonscheduled banks), nationalized sector (Reserve Bank of India, State Bank of India and all other nationalized commercial banks and post office savings bank), specialized corporate financial institutions (specific industrial finance corporations and state finance corporations), co-operative sector (co-operative banks and land development banks) and foreign sector (foreign commercial banks and exchange banks).

Keeping in mind the socio-economic goals of the country, banks were under strict control of the regulatory bank - Reserve Bank of India. For instance, during mid-1969, 14 major Indian commercial banks were nationalized. One of the major criticisms against nationalization of commercial banks was with respect to efficiency. And the critics were right. Since nationalization, the operational efficiency of the commercial banks have come down, thanks to the ‘public-sector working’ attitude of the bank work force. Since, their pay is not linked to performance; there is no inducement for the banking staff to perform well. This has been further, deteriorated by the poor quality to man power planning which is linked to selection of inefficient staff on the basis of social reservations.

Insurance

Insurance sector in India has been enjoying a state-monopoly status in India for decades. Under Indian conditions there is only two broad classifications of insurance companies: life 35 | P a g e

and non-life insurance. The life insurance activities are solely managed by Life Insurance Corporation of India and the rest is handled by General Insurance Corporation of India.

Life insurance business was started in India during British rule. Prior to independence, there were several insurance companies: Oriental Life Insurance Company, Bombay Life Assurance, The Madras Equitable Life Insurance Society, Oriental Government Security Life Assurance Company, etc. Most of the insurance companies were charging a very high extra premium of 15 to 20 per cent, since they considered Indian lives as sub-standard.

These insurance companies prevailed during the time of independence failed to sustain on a long term basis. As many as 25 companies were liquidated and another 25 companies had to merge with other companies at a lost to the policy holders. This has forced the Government of India in 1956 to nationalize all the 245 life insurance companies (154 Indian and 16 foreign), and form the Life Insurance Corporation of India.

Transport A well developed transport system will support an economy in several ways : supports the industry by increasing the efficiency of production, rises the demand through movement of products, facilitates the location of an industry, helps the development of urbanization, movement of man power, better standard of living, better education, etc. Contribution of transport to Indian economy is very significant.

Indian transport sector comprises of all forms of transports: railways, roadways, water and air transport.

Indian Railways, largest Indian public sector undertaking and largest railway system in Asia run 12000 trains a day, with over 63000 route kms of track. Indian Railways has around 7000 railway stations. The total distance covered by the 12000 trains every day equals three and 36 | P a g e

half times the distance to moon. It takes a gigantic task of carrying nearly 11 million passengers and 1.2 million tons of cargo per day. Indian Railways function as a major employment generator in India. Of the 27 million people employed in the organized sector, Indian Railways accounts for 6 per cent directly and an additional 2.5 per cent indirectly. Totally about 1.6 million people are employed by Indian Railways.

The importance of road transport to Indian economy cannot be neglected. Road transport is vital for the movement of agricultural products and also for industrial development. Thus, roads quicken the rate of growth. Further, road transport functions as a supportive system to railways. Railways can reach only certain locations, and the rest of the link is taken care by road transport. At the time of independence India had only 388000 kms of roads. Today, India has 2178008 km of road length, thanks to planning efforts.

The cheapest mode of transport is water transport, since water-ways provide readymade routes and thus no infrastructure costs involved in developing journey routes, compared to railway or road transport. India has both inland water and marine or shipping transport facilities. India possesses about 14150 kms. Of navigable inland water-ways. Notable Indian water-ways are: Ganga, Brahmaputra, Godavari, Krishna, Delta Canals, Mondovi, Zuari, Buckingham Canal and back-waters and the west coast canals of Kerala. Considering the geographical sea-base benefits of India, there is much scope to improve this mode of transport in the country, especially the coast line transport.

Telecom

In an economic policy frame work where the role of markets and incentives based on the price system are emphasized, infrastructural goods and services, such as telecommunications are generally characterized by high fixed investments, long gestation lags and relatively low

37 | P a g e

profits, especially during the initial phases of operation. For a long period, almost all the infrastructural projects in India were Government’s responsibility.

However, as India moved along the path of economic development, the process of liberalization began and private sector’s supportive role was recognized. Telecom sector was opened up for private sector participation into basic services and value added services with the policy announcement in May 1994. In order to meet the rising demand in the telecom sector, Indian Government decided to invite private players to supplant the government supported agencies in rendering basic as well as value added telecom services. Though opened up, barring a few areas like pagers and mobile phones, Indian telecommunication sector is dominated by Department of Telecom (DOT) and two government companies VSNL and MTNL.

Power

Power is a vital input for the growth of industrial development of any nation - higher the power, higher the industrial growth and higher the employment. Since independence most of the projects in this sector has been financed and managed by government agencies Center or State (nearly 90 per cent or more investment required for the power sector came from the public sector through Five Year/Annual Plans). However, since liberalization, the role of private sector, inclusive of foreign players was recognized in the power projects.

Power projects involve huge investments and overseas support in terms of financing as well as managing power projects become inevitable for a developing nation like India, since electricity cannot be easily imported or stored and hence, creation of generation capacity domestically is critical for meeting the country's demand for power. If the capacity additions are not done in time, power shortages result in the system which leads to inefficient operations and management, decelerate investment in other sectors of the 38 | P a g e

economy and hamper the growth process of the country in general. In India, the endemic power shortages and cuts lead to inadequate capacity utilization, unproductive expenditure such as in back-up generators and much waste, all of which impose a major constraint on economic growth.

Power Finance

During post-independence era, power - one of the major core sector - has been funded by the government/government

agencies,

when

private participation was almost nil in power

sector, thanks to government policies. However, with liberalization, this core sector was opened to private sector and consequently to the foreign players.

Further, due to constraints of funds with the Government of India, the public sector would suffer from inadequacy of funds. With present levels of finances, only 20000MW in each plan period could be built in the public sector. Thus, the rest (84000MW) is expected to be financed through private sector, both Indian and foreign.

Since the cost outlay in power projects are huge, financing the projects through internal accruals alone becomes inevitable; and further, the government is also slowly changing withdrawing itself from the role of producer and trying to stick-on only as a regulator in the long run. Thus, power producers has to look in for alternate source of financing such as, term loans from financial institutions (internally and internationally) like World Bank, ADB, ICICI, etc. and debt market in India and abroad.

Some 70 per cent of the finance required by the power sector over the next decade - total estimated at about Rs.5000 billion (US $143 billion) - has to be found through debt. While the sector could expect special consideration

in the allocation of foreign

debt

entitlement, the bulk of the debt finance will have to be raised in rupees. Identified level of 39 | P a g e

rupee debt at present is about 75 billion per annum. This would need stepping up significantly.

The center has decided to allocate about Rs.14000 crore for nuclear energy to generate an additional 1000MW during the Ninth Plan period. This is an Rs.1000 crore increase over the Eight Plan period allocation which was

Rs.13000

crore. Further, according

to the

estimation of Finance Minister, around 22.5 per cent of the proposed voluntary disclosure scheme for harnessing black money would be used for financing infrastructure projects and basic minimum services program.

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CHAPTER 2

LITERATURE REVIEW

INTRODUCTION In this section a review of the theories surrounding the topic is covered and also the various empirical studies that have been done on the relationship between stock market and economic development. The history of the Nairobi securities exchange is also discussed here in terms of growth and development and also looking at the various measures of economic growth and defining economic growth. Review of Theories There is no one theory that looks exclusively on stock market indices and economic development, most growth theories factor in the need for some elements such as capital and the importance of financial intermediaries in the economy, some of these theories are discussed below. The Neoclassical Theory: The Exogenous Growth Theory The neoclassical exogenous growth theory is also called the Solow-Swan growth model and is built upon the basic neoclassical frameworks of long run economic growth. This framework explains economic growth using four main components namely, productivity, capital accumulation, population growth and technological progress. This theory states that the long run economic growth is exogenously determined, that is, economic growth is determined by factors outside the basic model specifications. The basic building block of this theory is the production function which has constant labor (L) and capital (K) which are reproducible. Therefore the equation is Output (Y) being a function of Capital (K) The crucial aspect of the production function is the assumption of diminishing returns of capital accumulation. This means giving labor more capital goods without technological inventions will result in redundant investment of the new capital at a certain point. Another basic premise of the neoclassical growth model is that there tends to be a convergence to a steady state in the long run depending on the technological progress and rate of labor force growth. It states that a country that has higher savings than other will tend to growth faster 41 | P a g e

than those with low savings. In the very long run the role of capital accumulation plays a smaller role in this model than technological progress as nations move to the steady state. The neoclassical growth model emphasizes mostly on the importance of technological innovation in the long run growth to offset the effects of diminishing returns that affect both capital accumulation and labor increases in the economy (Aghion and Howitt, 1998). The Endogenous Growth Theory In the endogenous growth theory, economic growth is seen to be as a result of internal and not external forces, this means that households, investing in human capital and innovation play a significant role in the growth of an economy. This theory focuses on the positive externalities and spillover effects of a knowledge based economy which ultimately leads to economic development. It is in contrast to the exogenous growth model that emphasizes the role of technological processes as a scientific exogenous process that is not determined by economic forces. The main feature of the endogenous growth model is that the broad definition of capital stock is not subject to diminishing returns as with the exogenous growth model (Fry, 1997). This therefore means that growth is a positive function of the investment ratio. It states that in the long run, economic growth will depend on the policy measures that are taken by different governments. This implies that policies that embrace openness, competition and innovation will promote growth (Aghion and Howitt, 1998). Intermediation Theory Financial intermediation involves matching lenders with excess funds (savings) with borrowers who need the money and this is done by a third party agent such as a bank. The intermediation theory is built on models of resource allocation that are based on perfect and complete markets. The basis of complete perfect markets which this theory is based on comes from the basic assumptions of the neoclassical model that include lack of competitive advantages and little or no transaction costs in getting information as it is freely available to all participants in the market. These assumptions are however not realized in the real world due to various market imperfections such as asymmetric information which increases transaction costs and result in other having a competitive edge over others. Financial Intermediaries therefore exist to remove these imperfections and they do it in many ways. Intermediaries remove transaction costs by sharing or diversifying the evaluation of assets fixed costs, something individuals find difficult to do. This means that business is diversified 42 | P a g e

by financial intermediaries such as banks and with that costs are able to be reduced through economies of scale. Asymmetric information is removed through intermediaries as they act as delegated monitors for the lenders through collecting information on the borrower and also doing a number of screenings (for banks they look at credit worthiness of borrowers). Financial intermediaries also signal an informed position by investing in the assets they have particular knowledge of as they do extensive research about the market that some individuals can not readily and actively do. Intermediaries like banks also provide commitments to long term relationships with customers and thereby creating a relationship with the customer, removing the problem of adverse selection and moral hazard (Gwilym, 2008). The intermediation theory however only recognizes the importance of financial intermediaries in the economy for the role of removing transaction costs and asymmetric information.

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CHAPTER 3

RESEARCH METHODOLOGY

INTRODUCTION This section highlights the design of the study which is going to take the form of a causality test relation between the Stock market size, liquidity and economic growth in India. This section also looks at the population for the study in question which is the all the companies listed on the stock exchange and the Indian economy. Data will be mainly collected from the World Bank for the period 1993-2012. The Model to be used is the VAR model utilizing the granger test of causality over the SPSS Package.

RESEARCH PROBLEM The general consensus is that there is a positive relation between economic growth and financial development with Levine (1991) coming to the conclusion that countries with well developed financial markets have a better level of per capita income than those that do not have a developed financial market system. As Yartey and Adjasi (2007) mentioned, stock market liquidity is a problem with Indian stock markets were the markets are characterized by thin trading and also low levels of liquidity and this is brought about due to various factors such as a low investor knowledge base on the Indian stock markets and also trading access. This therefore impedes the growth of Indian markets and also the level of per capita income and hence economic growth There lies some lack of consensus among various authors on the role played by stock markets in the economy. Stiglitz (1985) argued that banks do a better job than stock markets in resource allocation and hence in impacting economic growth. Singh (1997) added on to say that the instability and volatility of stock markets leads to macroeconomic instability in the long run. Atje and Javanovich (1993) concluded that stock markets contribute positively to economic growth while authors like Jappeli and Pagano (1994), Boyd and Smith (1998) stressed the importance of both institutions

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Studies done on the causality between stock market and economic growth have also produced conflicting result that is; the expected relation or direction of causality has been different for one study and from the other. There has not been much study on this topic in India with a handful of studies have been done using the Vector Autoregressive (VAR) technique (specifically the granger test for causality) to test for the causality direction and the relationship. The studies include Wahome (2010), Olweny and Kimani (2011) and Owiti (2012). These studies have looked at the NSE 20Share index except Wahome (2010) who used the NSE All Share Index. The studies show that stock market size is correlated to growth but they produce conflicting results on the direction of causality between the NSE 20-Share index and economic growth and also conflicting results on variables of liquidity being correlated to economic growth. This paper therefore aims to explore how the development of the NSE index in terms of liquidity and market capitalization has impacted on economic growth in India.

OBJECTIVES OF STUDY PRIMARY OBJECTIVE:

 To understand the relationship between stock market development and economic growth in pre and post liberalization of Indian economy.

SECONDARY OBJECTIVE:

 To study about the impacts of stock market on Indian economy.  To study about the significant growth of stock market and Indian economy.  To study about the status of capital market and Indian economy in pre and post liberalized economy of India.  The objective of this study will be to determine causality relationship between the stock market size (market capitalization), liquidity and economic growth in India There are following scope of the study:45 | P a g e

 Relationship between stock market and Indian economy.  Impact of stock market on the growth of industrial sector of India and vice-versa.  Relationship between stock market and different sectors of Indian economy.  Impact of stock market on gross domestic product (G.D.P.). Stock market and Indian economy affects each other in significant way. So in this study I identified that area of Indian economy which are related with the fluctuation and variation of stock market..

VALUE OF STUDY There are various significant impacts on the Indian economy and industrial sector. Its contribution to the economy reflects the importance of the Indian stock market. So there are following importance of the topic of research paper.

 Study of the impact of stock market on Indian economy.  It helps to understand the reflection of the stock market fluctuation on industrial sectors and their growth.  Study of stock market impact on gross domestic product (GDP).  Help to understand the contribution to the better corporate governance.  It helps to understand the significance impact on the higher liquidity and control over credit.  Debt markets impact the economy? 

Increased funds for implementation of government development plans. The government can raise funds at lower costs by issuing government securities.



Conducive to implementation of a monetary policy.

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

Less risk compared to the equity markets, encouraging low-risk investments. This leads to inflow of funds into the economy.



Higher liquidity and control over credit.



Opportunity for investors to diversify their investment portfolio.



Better corporate governance.



Improved transparency because of stringent disclosure norms and auditing requirements.

There are following use and importance of the topic apart from above points: Impacts On Stock Market After Liberalization  Impacts on Indian economy after liberalization  Comparative study of various factors that affects the economy and stock market.

RESEARCH DESIGN The study will adopt a test of causation in order to look at the relationship between Stock market development and economic growth in India over a twenty year period from 19932019. The reason for this method is that in business, the cause and effect relationship is often ambiguous and there is therefore need to improve understanding on the relationship in question so as to better explain, predict and control the variables in question. The overall aim to aid investors, government and all other stakeholders involved in making informed decisions on policy directions and predictions on both the stock market and economy using the variables in question. POPULATION All companies listed on the National Securities Exchange and the Indian economy will make up the population to be looked at for this paper. DATA COLLECTION 47 | P a g e

Secondary data is collected for the period 1991-2019 as mentioned above and the sources of the data will be the World Bank statistics website. The data to be collected from the World Bank will be for both measures of stock market development and also the Indian GDP. All of the results are on an annual basis as provided by the World Bank (World Bank website, 2018). Type of Data Used:There are basically two types of Data 

Primary Data



Secondary Data

But here in the research report, I have used only secondary data. Which provides relative data regarding the research. Primary Data:Primary Data is first hand information that the researcher collects. It helps in collecting useful and most accurate information that is needed for the researcher to do his research. Secondary Data:Secondary data is what the researcher collects from different sources. It also help researcher to get elaborate information to do his research. Sources of Secondary Data:

Internet



Journals



Data From other organization

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DATA ANALYSIS Technique used for analysis & interpretation: Bar Diagram & Pie Chart  Correlation Analysis

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CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

ANALYSIS OF DATA COLLECTED There is a saying: stock markets have predicted 10 out of the last 3 recessions.

With plummeting share prices making headline news, it is worth considering the impact of the Stock market on the economy. How much should we worry when share prices fall? How does it impact on the average consumer? And how does it affect the economy?

Economic Effects of Stock Market

1. Wealth Effect

The first impact is that people with shares will see a fall in their wealth. If the fall is significant it will affect their financial outlook. If they are losing money on shares they will be more hesitant to spend money; this can contribute to a fall in consumer spending. However, the effect should not be given too much importance. Often people who buy shares are prepared to lose money; their spending patterns are usually independent of share prices, especially for short term losses.

2. Effect on Pensions

Anybody with a private pension or investment trust will be affected by the stock market, at least indirectly. Pension funds invest a significant part of their funds on the stock market. Therefore, if there is a serious fall in share prices, it reduces the value of pension funds. This means that future pension payouts will be lower. If share prices fall too much, pension funds can struggle to meet their promises. The important thing is the long term movements in the 50 | P a g e

share prices. If share prices fall for a long time then it will definitely affect pension funds and future payouts.

3. Confidence

Often share price movements are reflections of what is happening in the economy. E.g. recent falls are based on fears of a US recession and global slowdown. However, the stock market itself can affect consumer confidence. Bad headlines of falling share prices are another factor which discourages people from spending. On its own it may not have much effect, but combined with falling house prices, share prices can be a discouraging factor.

4. Investment Falling share prices can hamper firms’ ability to raise finance on the stock market. Firms who are expanding and wish to borrow often do so by issuing more shares – it provides a low cost way of borrowing more money. However, with falling share prices it becomes much more difficult.

As I said earlier there is an oft repeated quote saying the stock market has predicted 10 out of the last 3 recessions. The point is that falling stock markets do not necessarily predict the economic future. Share prices can fall without causing a downturn in the economy. For example, one thinks of the stock market crashes of October 1987; there wasn’t an obvious economic factor causing this share price fall. The major economies remained relatively unaffected by this stock market crash. In fact, the UK had record growth in the late 1980s. This time the stock market fall is due to economic weaknesses so is a better guide to future economic performance.

How does the economy affect stock investments?

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A stock’s price will go up and down based on what investors think about that individual company, its industry sector, or its competitors. But the economy can also play a role in stock prices. Stock prices go up and down in response to:  Interest

rates: The Bank of Canada can raise or lower interest rates to stabilize or

stimulate the Canadian economy. This is known as monetary policy. If a company borrows money to expand and improve its business, higher interest rates will affect the cost of its debt. This can reduce company profits and the dividends it pays shareholders. As a result, the stock price may drop.  Economic

outlook: If it looks like the economy is going to expand, stock prices may

rise. Why? Investors may buy more stocks thinking they will see future profits and higher stock prices.  Inflation:

Inflation means higher consumer prices. This often slows sales and reduces

profits. Higher prices will also often lead to higher interest rates. For example, the Bank of Canada may raise interest rates to slow down inflation. These changes will tend to bring down stock prices. However, commodities and some industries and companies can do better with inflation, so their prices may rise.  Deflation:

Here, the cost of goods and services drops. A dollar buys more. Interest

rates rise, so people borrow less. They often wait to buy goods in the hope that prices will drop more. The Great Depression (1929-1939) was one of the worst periods of deflation ever.  Economic

shocks: Big changes in the world can affect both the economy and stock

prices. For example, let’s say energy costs rise. This can affect a lot of companies and consumers and lead to lower sales, lower profits, and lower stock prices. Another example is an act of terrorism, which can lead to a downturn in economic activity and a fall in stock prices. 52 | P a g e

 Changes

of government: A new government can make new policies. Sometimes

these changes can be seen as good for business, and sometimes not. Sometimes they may lead to changes in inflation and interest rates. These changes may affect stock prices.  The

value of the Canadian dollar: Many Canadian companies sell products to

buyers in other countries. If the Canadian dollar rises, their customers will have to spend more to buy Canadian goods. This sometimes drives down sales, which in turn can lead to lower stock prices. On the other hand, when the price of the Canadian dollar falls, it makes it cheaper for others to buy our products. This can make stock prices raise. Watch these videos of Camilla Sutton, Scotia Capital currency strategist, with Rob Carrick from the Globe and Mail discussing how you can become your own currency analyst, how currency affects investment returns and what is driving the Canadian dollar right now.

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In the pre liberalized period the Indian economy is more instable. At that time it become negative due to various constraint and other factors. There are following two charts which reflect the pre and post liberalized position of Indian economy. These charts reflects the variation in economic system through GROSS DOMESTIC PRODUCT ,which more appropriate measure of Indian economy.

PRE-LIBERALISED PERIOD:

GDP of INDIA at factor cost(in percent) 12 10

8 6 4 GDP 2

1989-90

1987-88

1985-86

1983-84

1981-82

1979-80

1977-78

1975-76

1973-74

1971-72

1969-70

1967-68

1965-66

1963-64

1961-62

1959-60

1957-58

1955-56

-4

1953-54

-2

1951-52

0

-6

INDEPENDENCE TO 1991 Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public 54 | P a g e

sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.  Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy.  Indian GDP becomes three times negative before reforms period.  To set up a strong economic system Indian government has taken a steps to reform all its economic policies under the narsimham committee.

POST REFORM PERIOD:

After the liberalization period the Indian economy shows a positive. Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.[55] Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. Since 1990 India has emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security.

Following chart reflects the attitude of GDP after the reforms period. 55 | P a g e

Impact of Global Recession on Indian Market In the globalized market scenario, the impact of recession at one place/ industry/ sector perculate down to all the linked industry and this can be truly interpreted from the current market situation which is faced by the world since approx 2 month and still the situation is not in control in spite of various measures taken to fight back the recession in the market. The badly hit sector at present being the financial sector, and major issue being the "LIQUIDITY Crises" in the market.

In-spite of the various measures to subsidies the impact of the recession and cut down the inflation present nothing really sound have been done.

Various steps taken by RBI to curb the present recession in the economy and counter act the prevailingsituation. The sudden drying-up of capital inflows from the FDI which were invested in Indian stock 56 | P a g e

markets for greater returns visualizing the Potential Higher Returns flying back is continuing to challenge liquidity management. At the heart of the current liquidity tightening is the balance of payments deficit, and this NRI deposit move should help in some small way.

Because of the various reforms and improvement in various sectors strengthen the Indian economic system. After the reforms period Indian GDP reflects the positive trends.

The reforms progressed furthest in the areas of opening up to foreign investment, reforming capital markets, deregulating domestic business, and reforming the trade regime. Liberalization has done away with the License Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Rao's government's goals were reducing the fiscal deficit, privatization of the public sector, and increasing investment in infrastructure. Trade reforms and changes in the regulation of foreign direct investment were introduced to open India to foreign trade while stabilizing external loans. Rao's finance minister, Manmohan Singh, an acclaimed economist, played a central role in implementing these reforms. New research suggests that the scope and pattern of these reforms in India's foreign investment and external trade sectors followed the Chinese experience with external economic reforms.

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TABLE NO. 1

INDIAN ECONOMIC GROWTH & STOCK MARKET PERFORMANCES

S.N

YEAR

BSE SENSEX

1

1991

1000

3.2

2

1992

2000

5.7

3

1993

2500

1.3

4

1994

3100

5.1

5

1995

3127

5.9

6

1996

3260

7.3

7

1997

3694

7.3

8

1998

3060

7.8

9

1999

5000

4.8

10

2000

6000

6.5

11

2001

3467

5.1

12

2002

3390

4

13

2003

5915

5.4

14

2004

6779

8.5

15

2005

9000

7.1

16

2006

14000

7.5

17

2007

20000

9

18

2008

21000

9.5

19

2009

17464

9.2

20

2010

21000

6.7

21

2011

15550

7.2

22

2012

15448

6.72

23

2013

22000

6.69

24

2014

28000

4.47

25

2015

30000

4.74

26

2016

36700

7.2

27

2017

34000

7.1

28 29

2018 2019

38000 39000

6.7 7.3

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GDP GROWTH RATE

INTERPRATATION In above given table the Indian economic growth rate is presented along with the Stock market performances (i.e. BSE). The data is taken for 29 years from 1991 to 2019. As Sensex index is increasing the GDP growth is also increasing along with that. It states that stock market development has positive impact on Indian economy

CORRELATION ANALYSIS

INTERPRETATION The above calculated value is Karl Pearson correlation. By taking 29 variable in GDP growth rate as well as BSE sensex and using 1 tailed test the correlation coefficient is 0.312 i.e greater than 1. It means the stock market development & Indian economic growth is 59 | P a g e

moderately positive correlated with each other. And it’s clear that stock market development have positive impact on Indian economy growth. TABLE NO. 2

INDIAN ECONOMIC PERFORMANCES

GROWTH

&

STOCK

S.N

YEAR

BSE SENSEX

1

1991

1000

3.2

2

1992

2000

5.7

3

1993

2500

1.3

4

1994

3100

5.1

5

1995

3127

5.9

6

1996

3260

7.3

7

1997

3694

7.3

8

1998

3060

7.8

9

1999

5000

4.8

10

2000

6000

6.5

11

2001

3467

5.1

12

2002

3390

4

13

2003

5915

5.4

14

2004

6779

8.5

15

2005

9000

7.1

16

2006

14000

7.5

17

2007

20000

9

18

2008

21000

9.5

19

2009

17464

9.2

20

2010

21000

6.7

21

2011

15550

7.2

22

2012

15448

6.72

23

2013

22000

6.69

24

2014

28000

4.47

25

2015

30000

4.74

26

2016

36700

7.2

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GDP GROWTH RATE

MARKET

27

2017

34000

7.1

28 29

2018 2019

38000 39000

6.7 7.3

A COMPARATIVE CHART OF SENSEX IN PRE AND POST LIBERALIZED ECONOMY: SENSEX HISTORICAL DATA 45000 40000 35000 30000 25000 Sensex

20000

year 15000 10000 5000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0

The above chart reflect that before the reform the BSE Sensex is below 2000 and after the reforms it shows a positive trends because of following reason:

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 The major step taken in the reform is the Establishment of SECURITIES EXCHANGE BOARD OF INDIA. Which regulate the whole stock market?  Entry of foreign institutional investor, who played a very important role in the success of stock market.  Rules and regulation which strengthen the stock market.  Economic perspective of the Indian stock market performance.  After the reforms Indian stock exchanges has taken various step such as: Establishment of National Stock Exchange, Depositories, introduction of mutual fund, Dematerialization of securities etc…  Electronic trading also a positive effort taken by the SEBI to make stock market more effective.

TABLE NO. 3 INDIAN ECONOMIC GROWTH & STOCK MARKET PERFORMANCES YEAR

BSE SENSEX

GDP GROWTH RATE

SENSEX in '000

1991

1000

3.2

1

1992

2000

5.7

2

1993

2500

1.3

2.5

1994

3100

5.1

3.1

1995

3127

5.9

3.127

1996

3260

7.3

3.26

1997

3694

7.3

3.694

1998

3060

7.8

3.06

1999

5000

4.8

5

2000

6000

6.5

6

2001

3467

5.1

3.467

2002

3390

4

3.39

2003

5915

5.4

5.915

2004

6779

8.5

6.779

2005

9000

7.1

9

2006

14000

7.5

14

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2007

20000

9

20

2008

21000

9.5

21

2009

17464

9.2

17.464

2010

21000

6.7

21

2011

15550

7.2

15.55

2012

15448

6.72

15.448

2013

22000

6.69

22

2014

28000

4.47

28

2015

30000

4.74

30

2016

36700

7.2

36.7

2017

34000

7.1

34

2018 2019

38000 39000

6.7 7.3

38 39

45 GDP GROWTH RATE

40

SENSEX in '000 35 30 25 20 15 10 5

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0

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INTERPRATATION

The above chart reflect that since 1991 the BSE sensex and GDP Growth rate is showing positive trend. As Sensex is rising the GDP is also rising along with that. But in some year higher rise in Sensex does not show higher rise in GDP because of government policies like demonetization, GST etc.

WHY STOCK MARKETS AND BANKS BOTH, INDEPENDENTLY OF EACH OTHER, BOOST ECONOMIC GROWTH?

Although the empirical evidence is consistent with the view that stock markets and banks promote economic growth independently of each other, the reasons are not fully understood. One argument is that stock markets and banks provide different types of financial services. Stock markets offer opportunities primarily for trading risk and boosting liquidity; in contrast, banks focus on establishing long-term relationships with firms because they seek to acquire information about projects and managers and enhance corporate control. (There is, of course, some overlap. Like stock markets, banks help savers diversify risk and provide liquid deposits. Like banks, stock markets may stimulate the acquisition of information about firms, because investors want to make a profit by identifying undervalued stocks to invest in; stock markets may also help improve corporate governance by simplifying takeovers, providing an incentive to improve managerial competency.)

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CHAPTER 5

FINDINGS FINDINGS OF THE RESEARCH:  Indian economy and Indian stock market are positively related to each other. A positive growth of Indian economy reflects the significant growth of Indian stock market. Apart from this a positive growth in stock market investments reflects the growth in valuation of organization which ultimately leads to the growth of the Indian economy.  There are significant impacts of reforms on Indian economy. Step taken by Indian government are strengthen the economic system.  Capital market reforms influence the investments pattern of foreign as well as domestic investors.  Indian economy leads to the growth of stock market with positive correlation.  Indian stock market is the gateway to increase the value of the organization. Where open trading of various securities reflects the market value of the organization.  With the development in Indian economy since pre liberalized period stock market get positive development.  Indian government has taken various steps to strengthen the stock market and economic system.  Apart from Indian economy, the stock market affected from various other factor such as: investments from foreign institutional investors, Demand and supply of order to buy or sell the various securities.  Indian economy also affects from various other factor such as: various sector as service, transportation, power etc...

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CHAPTER 6

CONCLUSION In developing countries like India the positive growth of economy and stock market is possible through the proper strategies and balance of both. On the basis of analysis and findings, it is clear that economy leads the stock market and vice-versa.  The Indian stock market is uncertain but fundamentally it depends upon economic condition and various other factors. 

Economic condition of developing countries like India depend upon income and consumption pattern and growth of industrial, service , transportation sectors etc…

 The combination of both stock market and economic development leads to the rapid growth of any individual country.  Highly affected economy from the foreign investments.

 The stock market is driven by changes in economic growth.  Economic performance By 1995, the Indian stock markets were busy restructuring their systems. The industry continued to consolidate/restructure, improved its efficiency and shifted focus from capacity creation to cost competitiveness.

 Remember: Many factors can affect stock prices as well as economy of the country.

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CHAPTER 7

RECOMMENDATION After the analysis of the project study, following recommendations can be made:  Simplifying procedures and relaxing entry barriers for business activities and providing investor friendly laws and tax system for foreign investors.  There should be strict rules and regulation for strengthen the stock market and economy of the country.  Government should taka care economic system and regulation of stock market to protect the interest of Indian people.  There should be strict regulatory framework for economic and stock market activities.  Indian government should emphasis on infrastructure development which leads the Indian economy as well as stock market through change in investments pattern of Indian people.  More emphasis on untouched sector of Indian economy at the time of policy formulation.  There should be positive correlation between stock market development and Indian economy.

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BIBLIOGRPHY I have used following references to prepare this research report. The bibliography includes:

WEB SITES: www.bseindia.com www.economywatch.com www.wikipedia.com www.google.com www.sharemarketbasics.com

JOURNAL: Journal of national stock exchange. Journal of financial management BOOKS: Indian Financial system, Khan M Y Financial Services, Dharamraj E

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