Role of Capital Market in the Development of a Nation

Role of capital market in the context of development of nation
What is Capital Market? Institutional arrangements for facilitating the borrowing and lending of long term funds.

INVESTORS IN CAPITAL MARKET
Role of capital market
Capital Formation
Economic Growth
Development of backward area
Generates Employment
Long Term Capital to Industrial Sector
Generation of Foreign Capital
Developing Role of Financial Institution
Investment Opportunities
Capital Formation Rate of capital formation depends upon savings in the country.

The capital market mobilizes savings of households and of the industrial concern.

This savings are then invested for productive purposes.

Thus savings and investment leads to capital formation in country.
Economic Growth
Capital market facilitates the growth of the industrial sector as well as other sectors of the economy.
The main function of the capital market is to transfer resources (funds) from masses to the industrial sector.
The capital market makes it possible to lend funds to various projects, both in the private as well as public sector.
Development of backward area

The capital markets provide funds for the projects in backward areas.

This facilitates the economic development of backward areas.
Generates Employment
Capital market generates employment in the country:

Direct employment in the capital markets such as stock markets, financial institutions etc.

Indirect employment in all sectors of the economy, because of the funds provided for developmental projects.

Long Term Capital to Industrial Sector

The capital market provides a permanent long-term capital for the companies.

Once, the funds are collected through issues, the money remains with the company.
Generation of Foreign Capital
The capital market makes possible to generate foreign capital.

Indian firms are able to generate capital from overseas markets by way of bonds and other securities.