大胜利君子兰,当下的意思,2013年国考分数线
|
Meeting the goals of liberalisation- Before the liberalisation began, Indian capital markets were governed by the Capital Issues (Control) Act, 1947. The government controlled the manner and price at which companies could raise capital. As the government was no longer going to be a major investor in capital intensive sectors, a need for transparent and efficient capital markets was felt to enable private companies to generate resources to meet their financing needs.
Opportunity costs associated with traditional market design- Indian capital markets were characterised by excessive structural and micro regulation that inhibited financial innovation and increased transaction costs. For India to be able to integrate itself with global economy and attract flow of FIIs, it required modern and efficient securities markets as an operational mechanism.
Reactions to the crisis of 1992- Over the decade of the 1980s, millions of households became investors in the equity market. These households were adversely affected by the crisis of 1992 and worked as a new political constituency in favour of a market design which served the interests of investors rather than financial intermediaries.
The key stakeholders involved in this transformation were the Government of India, SEBI, Corporate sector, Institutional investors and retail investors. This ideas for reforms were accepted by all quarters without much resistance as it involved benefit to all stakeholders, for companies it meant easier access to capital, for investors it meant greater disclosures mechanisms and safer investment options, it also provided government with efficient tool to raise debt to finance its social welfare schemes. The process for modernisation included following major steps:-
SEBI which was set up as a non statutory body in 1988 was given statutory powers through enactment of SEBI Act, 1992. The twin objectives were – Protection of investors and orderly growth of capital markets [ii] .
The Capital Issues (Control) Act 1947 was repealed in May 1992 which allowed companies greater freedom in raising capital in markets.
Three new stock exchanges were set up NSE (1994), Over the Counter exchange (1992), Inter-connected stock exchange (1999).
Barriers to Modernization of Indian Stock Markets
The Pre-Liberalization policies that Indian Governments followed were clearly the biggest barriers to the modernization of Indian Stock Markets. From 1947 to 1990, the economic policies of the Indian Government were influenced by the colonial experience pre-1947. Indian leaders, for obvious reasons, perceived colonial policies as exploitive in nature and there was an evident fascination for Fabian Socialism and its ideals.
The Five Year Plans [iii] resembled central planning in the Soviet Union and all Government policies were effectively aimed at closing the Indian economy to the outside world. When the Left, as expected, stuck to its anti-liberalist ideals, the Rightist parties, before 1990, implemented policies that were in line with these principles. All economic policies tended towards the new catchphrase, ‘Protectionism’. Protectionism emphasized on industrialization, a large public sector, excessive business regulation, central planning, import substitution, state intervention in labour & financial markets and strict licensing. Steel, telecommunications, mining, machine tools, water, insurance and electrical plants among other industries, were for all practical purposes, nationalized in the mid-1950s.
Before 1990, the Indian Stock Market was primarily controlled by private brokers who had undue control over the activities of the few companies that actually traded in BSE. They did not want to relinquish control and therefore were opposed to the idea of modernization. Also, the practice of insider trading prevalent in most companies gave them a virtual monopoly over the Indian Stock market and they were again, opposed to modernization because the new rules meant greater transparency and regulation.
“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 laying 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.” - BBC
To add to all this, there was the bane of bureaucracy for both native and foreign investors to deal with. Elaborate and complicated regulations, mandatory inefficient licensing policies and of course, the Red Tape accompanying all these measures were required to set up businesses in India between 1940 and 1990. This trio of licence-related policies came to be commonly referred to as the Licence Raj.
The fixed exchange rate system also proved to be a stumbling block for stock market reforms. In this system, the rupee value was pegged to the value of a basket of currencies of major trading partners. Since 1985, due to all the reasons quoted above, India started facing balance of payments problems and by 1990, it was in a serious economic crisis. RBI refused new credit and forex reserves [iv] reduced to the point where the Govt. could barely finance imports worth 3 weeks! And to add insult to injury, the assassination of Prime Minister Indira Gandhi in 1984 and that of Rajiv Gandhi in 1991, absolutely crushed investor confidence on the Indian economy that was eventually pushed to a tight spot by early 1990s and modernization and liberalization of Indian Stock Markets looked like an improbable dream to both foreign and local investors.
“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.” - India Report, Astaire Research
Overcoming Barriers
Licence Raj was slightly reduced and telecom and software industries were promoted in the 1980s during the Rajiv Gandhi era. The VP Singh and Chandra Sekhar Governments added no significant reforms and stagnated the economy.
The barriers to modernization and liberalization of stock markets were primarily tackled by the Narasimha Rao Government and its finance policies propounded by the then Finance Minister, Manmohan Singh. The reforms were mainly aimed at opening up foreign investment, deregulating domestic businesses, reforming capital markets and reforming the trade regime. They did away with Licence Raj, ended public monopolies, allowing automatic FDI in many sectors while stabilizing external loans. The Government’s immediate measures to initiate stock market modernization included reduction of fiscal deficit, privatization of the public sector and increasing infrastructure investment. Analysts believe that these reforms followed the pattern of Chinese external economic reforms. Some of the major corrective measures taken were [v] :-
In the industrial sector, industrial licensing was cut, leaving only 18 industries subject to licensing. Industrial regulation was rationalized.
Abolition of Controller of Capital Issues in 1992 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.
Inception of National Stock Exchange as a computer-based trading system which served as an instrument to leverage reforms of India's other stock exchanges.
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 FDI by increasing the max limit on share of foreign capital in joint ventures from 40 to 51% with 100% 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 of India's equity markets to FII 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 & loss-inducing Govt. corporations was initiated.
|
