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Stock markets and economic growth of India - a study on impact of market capitalization on GDP

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Author Affiliations

  • 1Dept. of Commerce, Bhilai Mahila Mahavidyalaya, Bhilai, CG, India
  • 2Pt. Ravishankar Shukla University, Raipur, CG, India

Int. Res. J. Social Sci., Volume 7, Issue (4), Pages 21-27, April,14 (2018)

Abstract

The two fold policies of Indian economic system i.e. fiscal and monetary policy has been resulted into the efficient survival of economy of India after the inheritance of almost collapsed economy from the British Regime which was assisted by the NEP (liberalization, privatization and globalization) later on. Stock market is the most promising sector for raising the financial system of the Indian economy. After the phase of liberalization stock market has proven as an effective tool for competing with the economies of foreign countries. After the commencement of the stock market in the year 1875, it has contributed significantly towards strengthening of the economy by proving as an emerging platform for savers and investors. Various indices of the stock market has presented as an effective tool for the purpose of measuring developments of the economic performance. Frequency of financial crisis over India has affected adversely on the financial industry resulting into risks and uncertainties of the stock market. But CAPM, APT, Portfolio diversification acted as effective risk management tools of stock market which has driven NIFTY, SENSEX towards the growth and its rapid and unpredictable changes had astonished the expansion of the Indian economy with the aspects like real estates, equities, bonds and debentures. Gross Domestic Product is an important indicator of growth of an economy which has observed that the recently developing economies (BRIC) countries are getting more powerful than the countries which have a strong economic power traditionally such as economies of US and Germany. It has been predicted that the position of Indian economy will be at the third largest level among the globe after 2035. Stock market with its recent developments is an appreciable aspect of the financial system which is a highly contributing factor for the economic growth. It has become a magnificent job for new researchers to focus towards stock market aspects for the research works. A series of ascertainable studies already exists in this particular field. This research paper is an effort to determine the contribution of stock market developments in the growth of Indian economy. The secondary data sources such as bulletin reports of NSE, BSE, old as well as recent researches studies has been adopted for this paper in order to explore some new horizons of this aspect of the economy.

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