Read the following text carefully :
"In the recent times, the Government of India, has introduced several measures to encourage greater public participation in the capital market, including both primary and secondary stock markets."
Under which sector have the above mentioned reforms been introduced ? (Choose the correct option)
Read the following text carefully :
"In the recent times, the Government of India, has introduced several measures to encourage greater public participation in the capital market, including both primary and secondary stock markets."
Under which sector have the above mentioned reforms been introduced ? (Choose the correct option)
Options
Correct option: (B) Financial.
Measures that encourage greater public participation in the primary and secondary stock/capital markets are reforms in the financial sector, which includes banks, stock exchanges, and other financial institutions.
Marking Scheme
- 11 mark: correctly selects option B.
Hint
Primary and secondary stock markets are institutions of the financial sector.
Quick Oral Answer
Encouraging public participation in primary and secondary stock markets is a financial sector reform, since capital markets fall under the financial sector alongside banks and insurance.
Analysis & Explanation
Why B is correct
The financial sector comprises banks, insurance companies, non-banking financial institutions, and stock markets (primary, where new shares are issued, and secondary, where existing shares are traded). Reforms widening public participation in capital markets — such as easier demat account access, IPO reforms, and SEBI investor-protection measures — fall under financial sector reforms introduced as part of India's economic liberalisation since 1991.
Why the distractors are wrong
- Option A (Industrial) relates to industrial licensing and de-reservation, not stock market participation.
- Option C (Taxation) relates to direct/indirect tax reforms, not capital market access.
- Option D (Foreign Trade) relates to import-export policy, tariffs and quotas, unrelated to domestic stock market participation.
Common Mistakes
- 1Confusing financial sector reforms with industrial policy reforms, since both were introduced in the same 1991 reform package.
- 2Not recognising that 'capital market' (primary + secondary) is a financial-sector institution, not a taxation or trade concept.
Interesting Facts
SEBI (Securities and Exchange Board of India) was given statutory status in 1992 to regulate and develop India's capital markets.
India's Demat account count crossed 15 crore by 2024-25, reflecting a huge rise in retail investor participation, partly due to market-access reforms.
The 1991 financial sector reforms included reducing the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR), allowing private and foreign banks, and giving banks freedom to set interest rates.
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Frequently Asked Questions
What does the financial sector include?
The financial sector includes banks, insurance companies, non-banking financial companies, mutual funds, and stock/capital markets (primary and secondary).
Give one example of a financial sector reform in India.
Granting SEBI statutory powers in 1992 to regulate stock markets and protect investors is a key financial sector reform.