Indian Government has taken various steps to promote capital market. The Legal Measures, Promotional Measures, Regulatory Measures and Liberalization measures for growth of capital market are discussed below.
Measures taken by Govt for promotion of Capital Market
1. Legal Measures: The passing of Companies Act and the Securities (Contract and Regulation) Act were responsible for the promotion of Capital Market in India.
2. Promotional Measures: The creation of more public sector undertakings and financial institutions was responsible for improving capital market. Life Insurance Corporation, Unit Trust of India, State Bank of India and the Development banks such as ICICI, IDBI, and SFC are responsible for the contribution of enormous funds in the capital market.
3. Regulatory measures: The controller of Capital Issues was acting as regulator and without his permission, a company cannot issue shares. At present, this function is taken over by SEBI (Securities Exchange Board of India). The working of stock exchanges was also regulated and there were penalty provisions for preventing any violation. Companies which are listing their shares should fulfill the conditions by which genuineness of the issue of shares is ensured. The Directorate of Stock Exchange enforces the provisions of the Act and streamlines the working of Stock Exchanges.
4. Liberalization measures: After 1990, the economic liberalization measures adopted by the Indian government has resulted in more private sector expansion. Even the existing public sector undertakings have started liquidating some of the shares to the public. Foreign investments are given more concession. Expansion of private sector is being allowed. An important measure in liberalization is the entry of the private sector into some of the major infrastructure industries. Example: Insurance, Transport, Banking and Power.