Reform measures and policies have made Indian market much more efficient and today commodity, factor and capital markets are participating with their full potential in the growth and development of India.
Opening of the market has proved beneficial for the entire economy.
1. Promotion of exports by exploring markets outside: Export led growth:
Reduction of trade barriers had led to free flow of goods across national frontiers and the export sector is acting as a propelling force in development. Higher growth rate of export sector has
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a. Increased employment and personal income
b. Increased productivity and by learning effect it has helped in instilling new skills.
c. Use of domestic inputs by export sector instead of imported inputs has helped in the distribution of export income in favour of those with a marginal propensity to consume domestic goods instead of imported one.
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Therefore, export sector is an integral part of Indian economy and it should not be judged from the result of the economy. Instead, by establishing an integrated process, the stimuli from the export sector is needed to be diffused so as to create responses elsewhere in the economy.
2. Free flow of capital:
Capital inflows in the form of direct foreign investments, Inter-Govt loans, external commercial borrowing is benefiting India in a number of ways.
a. During the period when capital market is in the process of development, foreign capital is essential as a temporary measure which helps in speeding the economic activity.
b. Increases in economic growth and industrialization helps to import machinery, spare parts and raw materials.
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c. Foreign capital brings with it other scarce productive factors, such as technical knowhow, business experience & knowledge essential for development i.e., it facilitates transfer of technology.
d. Supplements domestic savings and capital formation.
e. Thus foreign capital has more available additional supplies of foreign exchange which has helped to raise the level of investment, stabilize food prices and import raw materials, enlargement of irrigation & power generation potential, improved transports, helped in the construction of steel, petrochemical and electronic industry etc.
3. Technology transfer domestic & international market:
The principal instruments of technology transfer are MNC’s which either through their subsidiaries or through the contractual transactions made with developing countries.
a. Bring mechanized process and equipment which are not locally available.
b. Injects foreign experience and expertise in developing country.
c. Transmits the latest improvements from the developed to the underdeveloped countries.
4. Free movement of labour force in different countries of the world:
a. Has increased employment opportunities.
b. Increased income and productivity
c. Improved efficiently and skills of labours.
d. Helped in exchanging knowledge and experience.
5. Growth in capital market:
a. Promotion of capital market has helped the growth of joint stock companies or corporate enterprises. In 2000, there were over 70000 companies with a paid up capital over Rs 200,000 crores.
b. Tax relief had led to increase in the volume of saving and investment growth of public borrowings for investment purposes.
b. By 2000, there were 250 non-departmental public enterprises of the central Govt alone with capital of Rs 150,000 Cr.
a. Diversification and a measure of sophistication of the financial services.
6. International trade as an engine of growth:
a. Widening the market, including innovations and increasing productivity
b. Increase in savings and capital accumulation
c. Install new technology, new confidence, skill and entrepreneurship.