CA Foundation Exam > CA Foundation Videos > Business Economics for CA Foundation > Capital formation - Money Market and Capital Market structure in India, Indian Economy
Capital formation - Money Market and Capital Market structure in India, Indian Economy Video Lecture | Business Economics for CA Foundation
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FAQs on Capital formation - Money Market and Capital Market structure in India, Indian Economy Video Lecture - Business Economics for CA Foundation
| 1. What is capital formation in the Indian economy? |  |
Ans. Capital formation in the Indian economy refers to the process of increasing the stock of physical and financial capital within the country. It includes the accumulation of savings, investment in various sectors, and the creation of productive assets. This process plays a crucial role in promoting economic growth and development.
| 2. What is the difference between the money market and capital market in India? | |
Ans. The money market in India is a market for short-term borrowing and lending, where financial instruments with a maturity period of up to one year are traded. It includes instruments like Treasury Bills, Commercial Papers, and Certificates of Deposit. On the other hand, the capital market deals with long-term borrowing and lending, where instruments like stocks and bonds are traded. It provides a platform for raising long-term capital for businesses and investments.
| 3. How does the money market contribute to capital formation in India? | |
Ans. The money market in India plays a significant role in capital formation by providing short-term funds to various sectors of the economy. It enables businesses and individuals to meet their immediate cash flow requirements and finance their working capital needs. By facilitating efficient borrowing and lending, the money market ensures a smooth flow of funds, which ultimately supports the process of capital formation.
| 4. What is the significance of the capital market in India's economy? | |
Ans. The capital market in India is of great importance as it provides a platform for long-term investment and capital raising. It allows companies to raise funds for expansion, modernization, and diversification of their operations. It also offers individuals and institutional investors the opportunity to invest their savings in various financial instruments, such as stocks and bonds, with the expectation of earning returns. The capital market, therefore, plays a crucial role in mobilizing savings and channelizing them towards productive investments.
| 5. How does capital formation contribute to economic growth in India? | |
Ans. Capital formation is essential for promoting economic growth in India. When there is an increase in the stock of physical and financial capital, it leads to higher production capacities and improved productivity. This, in turn, leads to increased employment opportunities, higher income levels, and a rise in the overall standard of living. Capital formation also facilitates technological advancements, infrastructure development, and the expansion of industries, all of which contribute to sustained economic growth.
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Nov 08, 2024 Last updated |
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