印度现代化股市分析的墨尔本assignment范例

印度现代化的股市也许是在过去的二十年印度经济最大的变化。这场创新的影响已经十分深远,它被许多人认为是最有效的印度经济自由化先驱-这一进程在1990年由P V Narasimha Rao and Manmohan Singh开创。

 

印度现代化的资本市场同时也是一个企业,政府和社会一起来率先创建出屏障变化然后通过彼此的交流互动帮助其更快的实现的典型例子。有趣的是,它也是经济学新制度主义与凯恩斯主义模型的典型实例对比。在1990年以前,印度的资本市场是一个伴随在权力下运行的印度政府的高度监管部门,从而表现出一个完美的凯恩斯模型!然而,这被证明是非常不利于印度的经济的,因为它开始面临严重的国际收支问题,印度的外汇储备减少,政府几乎无法持续进口融资达3周。Narasimha Rao政府在1990年启动了现代化的进程,第一步,是对股票市场的管制。再逐渐地,市场走向经济学新制度主义形式的监管。当达到了另一个极端,私人股东开始利用该系统开始在印度股市进行一系列臭名昭著的诈骗。这要求有一定的预防措施和防护规定。于是印度股市最后确定在这两者的中间,一个经济学新制度主义与凯恩斯主义监管措施健康的混合。

 

印度现代化股市的分析-Analysis Of The Modernisation Of Indian Stock Markets 

 

The modernization of Indian Stock Markets is perhaps, the biggest change that hit the Indian economy in the last two decades. The effects of this innovation has been truly far-reaching and it is deemed by many as arguably the most effective forerunner of liberalization of the Indian economy – a process started by P V Narasimha Rao and Manmohan Singh in 1990.

 

The modernization of India’s capital markets is also a classic example of an innovation where Business, Government & Society come together to first create barriers for the change and later, help in faster implementation through their interactions with each other. It is also interestingly, a classic case of Smithian vs. Keynesian models of regulation. Before 1990, the capital markets in India was a highly regulated sector, with the Indian Government exercising undue power, thereby exhibiting a perfect Keynesian model! However, this proved to be highly detrimental to the Indian economy as it started facing serious balance of payments problems and India’s foreign exchange reserves reduced to the point where the Govt. could barely finance imports worth 3 weeks. The Narasimha Rao Govt. in 1990, initiated the process of modernization and the first step towards this, was deregulation of the stock markets. Gradually, the market moved towards a Smithian form of regulation. As this reached the other extreme, private shareholders started exploiting the system and there was a series of infamous scams in the Indian stock market. This called for preventive measures and protective regulation. The Indian stock market finally settled somewhere at the middle, with a healthy mix of Smithian and Keynesian regulatory measures.

 

In this report, we first enlist the salient features of this innovation and take a quick look at its social impact. We look at how the new measures implemented, deregulated the stock market and encouraged more private participation, opening up the Indian stock market to the ‘aam aadmi’. This is followed by a study the process by which the innovation was implemented. Here we look at the events that led to the implementation of this measure, identify the key stakeholders involved and enumerate the three major steps leading to the implementation of this innovation. Next, we look at the barriers that it faced from all three quarters (Business, Govt. & Society) and also, explain the steps taken to overcome these barriers. In this section, we discuss how factors like colonialism, Fabian Socialism, Protectionism, bureaucracy, Red tapism, insider trading, private monopoly etc. proved to be stumbling blocks in the path of modernization. Then the outcomes of this measure are critically analyzed, its effectiveness assessed and what could have been done to make it further effective, is discussed. Here we introduce the concept of “hasty liberalization” and finally, we conclude with a discussion on the key takeaways and inferences from this study.

 

In short, the study of modernization of Indian stock markets and its effects is a good story that brings out the effects of interactions among Businesses, Governments and Society with respect to a rather significant public innovation and more importantly, the role of regulation in the corporate world.

 

Major Reforms in the Indian Capital Market

 

Free pricing was introduced which meant that issuers of securities were allowed to raise capital without requiring any consent from any authority either for making the issue or for pricing it. However issuer of capital were required to meet the SEBI guidelines for Disclosure and Investor Protection which covered the eligibility norms for making issues of capital at par and premium by various companies.

 

With the removal of capital issue control and free pricing there was an unprecedented upsurge of activity in the primary capital market. It exposed the inadequacies of the regulations. Thus SEBI strengthened the norms for public issues in April, 1996 without curtailing the freedom of issuers to enter the market and freely price their issues. Aim was to increase transparency for effective investor protection. Issuers of capital were now required to disclose information on various aspects like track record of profitability, risk factors, etc.

 

There was modernisation of trading infrastructure by replacing the open outcry system with on-line screen based electronic trading. 23 stock exchanges with 8000 trading terminals were spread throughout the country which improved the liquidity of Indian capital market and better price discovery.

 

Trading and settlement cycles were shortened from 14 days to 7 days. The efficiency of secondary market was enhanced by rolling settlement which was enhanced on T+5 bases. At April 1, 2002 the settlement cycle was shortened to T+3 for all listed securities, which was further changed to T+2.

 

Measures like margining system, intra-day trading limit, exposure limit and setting up of trade/ settlement guarantee fund were undertaken or strengthened to ensure safety and integrity of market

 

Securities which were held in physical form were dematerialised and their transfer was done through electronic book entry.

 

All listed companies were required to furnish stock exchange and publish quarterly unaudited financial results for the purpose of continuous disclosure. For enhancing the same SEBI amended the Listing Agreement to incorporate the Segment Reporting, Accounting for Taxes on Income, Consolidated Financial Results, Consolidated Financial Statements, Related Party Disclosures and Compliance with Accounting Standards

 

There was increased integration between Indian and International capital market. FIIs such as mutual funds, pension funds and country funds were allowed in the Indian markets. Indian firms could now raise capital through issues of Global Depository Receipts (GDRs), American Depository Receipts(ADRs), Euro Convertible Bonds(ECBs), etc.

 

SEBI removed the influence of brokers in functioning of stock exchange by denying them from being officer bearers of an exchange or hold the position of President, Vice President, Treasure, etc.

 

Apart from stock exchanges, various intermediaries, such as mutual funds, stock brokers and sub-brokers merchant bankers, portfolio managers, registrars to an issue and share transfer agents, underwriters, debenture trustees, bankers to an issue, custodian of securities, venture capital funds and issuers have been brought under the SEBI’s regulatory purview.

 

Regulations were put in place for governing substantial acquisition of shares and takeovers of companies. The process was made more transparent to protect the interest of minority shareholders

 

Trading in derivative products such as stock index future stock index options and futures and options in individual stocks were also introduced

 

社会影响-Social Impact

 

The dematerialisation led to greater participation of public in Indian Stock Markets. Removal of Barriers provided apt environment for innovative companies like TCS and Infosys to grow, as they could now easily raise capital from public as well as foreign investors. The freeing of market led to increased competition as there were more number of private as well as foreign companies entering the market, and it helped in raising the infamous Hindu Growth Rate. Investors become more cautious and involved into analysing financial market because, the added benefits came with the risk of scams by fraudulent companies. In all it increases the risk appetite of Indian public who traditionally involved in risk averse options like Fixed Deposits in Bank, saving schemes of post office etc.

 

创新过程-Process of Innovation [i] 

 

In June 1991, India was in the midst of severe fiscal and external imbalances which had generated Double digit inflation and put the country on the verge of defaulting on its external debt obligations. Manmohan Singh as a finance minister in PV Narsimha Rao government pushed forward the idea of Economic liberalisation, the modernisation of Indian stock exchange was a part of this larger plan. The main reasons that led to reforms in Indian capital markets are as follows:-#p#分页标题#e#

 

Meeting the goals of liberalisation- Before the liberalisation began, Indian capital markets were governed by the Capital Issues (Control) Act, 1947. The government controlled the manner and price at which companies could raise capital. As the government was no longer going to be a major investor in capital intensive sectors, a need for transparent and efficient capital markets was felt to enable private companies to generate resources to meet their financing needs.

 

Opportunity costs associated with traditional market design- Indian capital markets were characterised by excessive structural and micro regulation that inhibited financial innovation and increased transaction costs. For India to be able to integrate itself with global economy and attract flow of FIIs, it required modern and efficient securities markets as an operational mechanism.

 

Reactions to the crisis of 1992- Over the decade of the 1980s, millions of households became investors in the equity market. These households were adversely affected by the crisis of 1992 and worked as a new political constituency in favour of a market design which served the interests of investors rather than financial intermediaries.

 

The key stakeholders involved in this transformation were the Government of India, SEBI, Corporate sector, Institutional investors and retail investors. This ideas for reforms were accepted by all quarters without much resistance as it involved benefit to all stakeholders, for companies it meant easier access to capital, for investors it meant greater disclosures mechanisms and safer investment options, it also provided government with efficient tool to raise debt to finance its social welfare schemes. The process for modernisation included following major steps:-

 

SEBI which was set up as a non statutory body in 1988 was given statutory powers through enactment of SEBI Act, 1992. The twin objectives were – Protection of investors and orderly growth of capital markets [ii] .

 

The Capital Issues (Control) Act 1947 was repealed in May 1992 which allowed companies greater freedom in raising capital in markets.

 

Three new stock exchanges were set up NSE (1994), Over the Counter exchange (1992), Inter-connected stock exchange (1999).

 

Barriers to Modernization of Indian Stock Markets

 

The Pre-Liberalization policies that Indian Governments followed were clearly the biggest barriers to the modernization of Indian Stock Markets. From 1947 to 1990, the economic policies of the Indian Government were influenced by the colonial experience pre-1947. Indian leaders, for obvious reasons, perceived colonial policies as exploitive in nature and there was an evident fascination for Fabian Socialism and its ideals.

 

The Five Year Plans [iii] resembled central planning in the Soviet Union and all Government policies were effectively aimed at closing the Indian economy to the outside world. When the Left, as expected, stuck to its anti-liberalist ideals, the Rightist parties, before 1990, implemented policies that were in line with these principles. All economic policies tended towards the new catchphrase, ‘Protectionism’. Protectionism emphasized on industrialization, a large public sector, excessive business regulation, central planning, import substitution, state intervention in labour & financial markets and strict licensing. Steel, telecommunications, mining, machine tools, water, insurance and electrical plants among other industries, were for all practical purposes, nationalized in the mid-1950s.

 

Before 1990, the Indian Stock Market was primarily controlled by private brokers who had undue control over the activities of the few companies that actually traded in BSE. They did not want to relinquish control and therefore were opposed to the idea of modernization. Also, the practice of insider trading prevalent in most companies gave them a virtual monopoly over the Indian Stock market and they were again, opposed to modernization because the new rules meant greater transparency and regulation.

 

“Before the process of reform began in 1991, the government attempted to close the Indian economy to the outside world. The Indian currency, the rupee, was inconvertible and high tariffs and import licensing prevented foreign goods reaching the market. India also operated a system of central planning for the economy, in which firms required licenses to invest and develop. The labyrinthine bureaucracy often led to absurd restrictions. Up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used! The government also prevented firms from laying off workers or closing factories. The central pillar of the policy was import substitution, the belief that India needed to rely on internal markets for development, not international trade—a belief generated by a mixture of socialism and the experience of colonial exploitation. Planning and the state, rather than markets, would determine how much investment was needed in which sectors.” - BBC

 

To add to all this, there was the bane of bureaucracy for both native and foreign investors to deal with. Elaborate and complicated regulations, mandatory inefficient licensing policies and of course, the Red Tape accompanying all these measures were required to set up businesses in India between 1940 and 1990. This trio of licence-related policies came to be commonly referred to as the Licence Raj.

 

The fixed exchange rate system also proved to be a stumbling block for stock market reforms. In this system, the rupee value was pegged to the value of a basket of currencies of major trading partners. Since 1985, due to all the reasons quoted above, India started facing balance of payments problems and by 1990, it was in a serious economic crisis. RBI refused new credit and forex reserves [iv] reduced to the point where the Govt. could barely finance imports worth 3 weeks! And to add insult to injury, the assassination of Prime Minister Indira Gandhi in 1984 and that of Rajiv Gandhi in 1991, absolutely crushed investor confidence on the Indian economy that was eventually pushed to a tight spot by early 1990s and modernization and liberalization of Indian Stock Markets looked like an improbable dream to both foreign and local investors.

 

“A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout, gold was transferred to London as collateral, the Rupee devalued and economic reforms were forced upon India. That low point was the catalyst required to transform the economy through badly needed reforms to unshackle the economy.” - India Report, Astaire Research

 

Overcoming Barriers

 

Licence Raj was slightly reduced and telecom and software industries were promoted in the 1980s during the Rajiv Gandhi era. The VP Singh and Chandra Sekhar Governments added no significant reforms and stagnated the economy.

 

The barriers to modernization and liberalization of stock markets were primarily tackled by the Narasimha Rao Government and its finance policies propounded by the then Finance Minister, Manmohan Singh. The reforms were mainly aimed at opening up foreign investment, deregulating domestic businesses, reforming capital markets and reforming the trade regime. They did away with Licence Raj, ended public monopolies, allowing automatic FDI in many sectors while stabilizing external loans. The Government’s immediate measures to initiate stock market modernization included reduction of fiscal deficit, privatization of the public sector and increasing infrastructure investment. Analysts believe that these reforms followed the pattern of Chinese external economic reforms. Some of the major corrective measures taken were [v] :-

 

In the industrial sector, industrial licensing was cut, leaving only 18 industries subject to licensing. Industrial regulation was rationalized.

 

Abolition of Controller of Capital Issues in 1992 which decided the prices and number of shares that firms could issue

 

Introducing the SEBI Act of 1992 and the Security Laws (Amendment) which gave SEBI the legal authority to register and regulate all security market intermediaries.

 

Inception of National Stock Exchange as a computer-based trading system which served as an instrument to leverage reforms of India's other stock exchanges.

 

Reducing tariffs from an average of 85 percent to 25 percent, and rolling back quantitative controls. (The rupee was made convertible on trade account.)

 

Encouraging FDI by increasing the max limit on share of foreign capital in joint ventures from 40 to 51% with 100% foreign equity permitted in priority sectors.

 

Streamlining procedures for FDI approvals, and in at least 35 industries, automatically approving projects within the limits for foreign participation

 

Opening up of India's equity markets to FII and permitting Indian firms to raise capital on international markets by issuing Global Depository Receipts (GDRs).

 

Marginal tax rates were reduced.

 

Privatization of large, inefficient & loss-inducing Govt. corporations was initiated.

 

Post-Liberalisation Effects on Indian Stock Market

 

The market capitalisation ratio (value of listed shares/GDP) is regarded as a measure of size of stock market in a country and it increased from about 1:5 in 1991 to almost 2:3 by 1995. Equity capital of BSE listed companies almost trebled to 93 percent by 1995-96 which indicates a relatively important place attained by Indian stock market. The number of companies listed at BSE more than doubled between 1991-92 and 1995-96. The number of issues increases from 455 in 1991-92 to nearly 1700 each in 1995-96, however the issues steeply declined and reached 156 which is about one-third of 1991-92 level. The main reason was the stock scam during which the BSE Sensex more than doubled from about 2000-4000. This gave public idea of windfall gains and created a ‘herd’ mentality. Optimism generated from entrepreneurs by the virtual demolition of industrial licensing system and entry of small companies with the aim of quick money through price manipulations were other reasons for the unprecedented rise. The period saw a good number of non-manufacturing companies and also the purpose of issue varied from project finance to working capital. A number of public issues were made without proper scrutiny. This led SEBI to strengthen its criteria of public issue, now issuing companies should have paid dividend for 3 years out of preceding 5 years and a manufacturing company without the three year track record of dividend payment can access the securities market if its project has been appraised by a public financial institution or a scheduled commercial bank and the appraising agency participates in the project by way of loan or equity to the extent of minimum 10 per cent of the project. The aggregate market turnover increased significantly during the post-liberalisation period, the increase has been more substantial after 1995-96. Fall in turnover due to scam in 1992-93 following the exposure of scam was more than recovered in 1993-94. Another problem was that out of 6000 companies listed on the BSE, about 30 percent were not traded at all during 1998. Heavy concentration in turnover has been another important characteristic of the Indian Stock Market. Out of the turnover of 2400 companies listed on BSE in 1989-90, the share of top 50 was nearly 82 percent and it stood nearly at 86 percent in 1996.

 

“草率的自由化”-“Hasty Liberalisation”
 

The decision to liberalise stock market was sudden as a part of the ‘shock therapy’ without adequate preparation or understanding of the behaviour of the financial sector and of the major players – intermediaries, promoters, investors and regulators – in a country like India, and even ignoring the experience of the 1980s when initially the stock market was given a major push. The regulatory framework was slow to evolve. The Capital Issues Control Act was repealed even though there were securities scams. It was like that government was following a pre-set timetable. The process of liberalisation should have been more gradual. SEBI was inexperienced and in addition government failed to arm it with adequate powers in time. This enabled the private sector to misuse the new freedom and it resulted in a series of scam of various scale and magnitude. Even large houses and translational corporations took advantage of policy vacuum and issued shares to themselves at ridiculously low prices. Scam was unfortunately characterised by long drawn investigations, procedural delays and a slow acting judiciary which brought a lot of Indian stock market. Investor could not adjust to the rapid changes as now the public financial institutions, the industrial licensing systems and the capital issue control mechanisms could no longer be trusted to assess the feasibility, viability and profitability of investment projects. The atmosphere was ‘euphoric’ and investors were ignoring the risk factors revealed in the issue prospectuses of the so-called ‘vanishing companies’. Primary market dried up, investors lost confidence in stock market and households shifted from investing in shares and debentures. Companies had to again rely on assistance from banks and financial institutions. Liquidity crunch meant that investors could not exit company even after realising that the prospects of capital appreciation or dividend earnings were very poor. Having faced the scams it meant that investors would be more cautious in future, however this positive outcome was achieved at a substantial cost and brought the very concept of stock market regulation to dispute.

 

Key Lessons and Takeaways

 

The government is not always the best allocator of resources – Before the liberalisation of stock exchanges the funds raised through capital markets were channelled through the Govt. and the business houses close to centre were the ones which benefitted the most. This form of crony capitalism was detrimental to the growth of country as a whole, as the returns from equity due to inefficient allocation were less than what a free market system could have provided.

 

Market mechanism cannot be allowed free rein in any forms of society- The mechanisms and regulations in place before the liberalisation were stifling the innovation and growth of economy. The Government brought in a shock therapy by doing away with most of regulations in one go in the 1990s. This exposed the dark underbelly of free market mechanism. As there was information asymmetry, many companies were able to con innocent retail investors through price rigging. The IPOs that hit the market were priced at huge premiums. Stock markets work on basis of a Keynesian Beauty Contest where you do not judge the choice you are making on basis of its merits but on the basis of herd mentality. When the retail investors saw that there were windfall gains being made in stock markets, they jumped in without any prior knowledge or analysis and were duped by fly by night companies.

 

Importance of the role of regulator- Though there have been scams that have rocked the markets time and again, SEBI has been largely successful in increasing investor confidence and ensuring transparent capital markets. More stringent Disclosure policies imposed by SEBI resulted in decreasing the information asymmetry; it also took up initiatives to make investors better informed about their rights. Life was made easier for companies as well, as the simplification of procedures reduced the transaction costs and lessened time needed to tap the capital markets.

 

Importance of technology in system- When shares were traded in physical form it was a lot of hassle for investors to trade their shares. There only source of income were dividends from shares and they could not take advantage of increased share price. Introduction of Demat accounts has done away with problem of physical possession.

 

Promotion of Innovation- Many companies which today form the backbone of the Indian economy benefitted from modernisation of stock exchanges. The likes of Infosys & TCS tapped capital markets to fund their growth. The most recent innovative company to raise money has been SKS Microfinance which is working on model of social entrepreneurship.

 

In conclusion, this exercise has highlighted that liberalisation does not mean doing away with all checks and balances but putting in place a mechanism for market forces to function in a free and fair manner, keeping in view that no group is at a distinct disadvantage, thereby minimizing risk of systematic failure.