The aim of this paper is twofold: to show the positive growth effect on economies through steady stock market growth, and to analyze the performance of India’s stock markets over the last decade on national growth. I start out in Section I with economic analyses of the high correlation between stock market indicators and the development of all financial institutions. Studies conducted by other economists prove correlations between the stock market and other macroeconomic indicators such as liquidity, level of banking, volatility, consumption, income and stock prices. Section II is a detailed case analysis of the Bombay Stock Exchange (BSE) that has for decades failed to provide substantial growth to the Indian economy. After the balance of payments crisis in 1991, the BSE underwent major management changes such as the creation of the Securities and Exchange Board Commission and the National Stock Exchange that have undoubtedly improved the stock market’s role. There has been a significant increase in the BSE’s role in Indian markets. Nonetheless, in order to make the stock exchange efficient, continued efforts are needed to restore market optimism by fighting off mass corruption, and by guaranteeing domestic and foreign investors a functional regulatory system.
"Financial Intermediation and National Growth: Why India Needs to Further Develop its Stock Markets,"
University Avenue Undergraduate Journal of Economics:
1, Article 5.
Available at: http://digitalcommons.iwu.edu/uauje/vol6/iss1/5