5 Development of Securities Markets: The Indian Experience

Table 5.3. Resource Mobilization by the Corporate Sector
(In rupees crore)
Share of
Share of Debt
Total
Private
in Total 
Public
Debt Issues
Resource
Placements in
Resource
________________________
Equity
Public
Private
Total
Mobilization Debt Issues Mobilization
Year
Issue
issues
placements
(3+4)
(2+5)
(4/5*100)
(5/6*100)
1
2
3
4
5
6
7
8
1995–96
14,493
5,970
13,361
19,331
33,824
69.12
57.15
1996–97
7,928
7,483
15,066
22,549
30,478
66.81
73.99
1997–98
1,701
2,957
30,099
33,056
34,756
91.05
95.11
1998–99
2,622
6,743
49,679
56,422
59,044
88.05
95.56
1999–00
3,230
4,475
61,259
65,734
68,964
93.19
95.32
2000–01
3,111
3,251
67,836
71,087
74,198
95.43
95.81
2001–02
1,025
6,087
64,876
70,963
71,988
91.42
98.58
2002–03
1,233
3,634
66,948
70,582
71,815
94.85
98.28
2003–04
3,427
4,424
63,901
68,325
71,752
93.53
95.22
2004–05
18,024
3,868
85,102
88,970
106,994
95.65
83.15

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©International Monetary Fund. Not for Redistribution
Narendra Jadhav 127
regulatory requirements, accounting and auditing standards for issuers, 
and the infrastructure for trading, clearing, and settlement need to be 
further developed.
Government Securities Market
A well-developed government securities market facilitates market-based 
conduct of monetary policy and provides a domestic credit risk–free rupee 
yield curve as a benchmark for prices of other securities. However, prior 
to 1991, the government securities market was not developed, because of 
inefficient market practices and lack of proper institutional infrastruc-
ture. Subscriptions to government securities emanated mainly from the 
reserve bank, as it monetized the budget deficits of the government and 
banks as part of fulfilling its statutory obligations. The main factor that 
inhibited the development of the sovereign yield curve in India in the pre-
reform period was the prevalence of artificially low administrative cou-
pon rates on these securities that were out of alignment with other interest 
rates in the economy. The coupon rates remained virtually unchanged 
up to 1979–80. Thereafter, although coupon rates were revised upward, 
especially for securities of longer tenor, the yield of a 30-year govern-
ment bond remained lower than the maximum bank deposit rate. The 
reserve bank, despite being the debt manager for the government, did not 
have control over volume, maturity, and term structure of interest rates 
in the government securities market. This was mainly on account of the 
absence of any limit to the automatic monetization of central government 
budget deficits. Consequently, the market remained narrow, with captive