Corporate Sector:

The 1990s witnessed emergence of the securities market as a major source of finance for trade and industry. A growing number of companies are accessing the securities market rather than depending on loans from FIs/banks. The corporate sector is increasingly depending on external sources for meeting its funding requirements. There appears to be growing preference for direct financing (equity and debt) to indirect financing (bank loan) within the external sources. According to CMIE data, the share of capital market based instruments in resources raised externally increased to 53% in 1993-94, but declined thereafter to 31% by 2000-01.

Average annual capital mobilisation from the primary market, which used to be about Rs.70 crore in the 1960s and about Rs.90 crore in the 1970s, increased manifold during the 1980s, with the amount raised in 1990-91 being Rs. 4,312 crore. It received a further boost during the 1990s with the capital raised by non-government public companies rising sharply to Rs. 26,417 crore in 1994-95.

The market appears to have dried up in the late 1990s due to inter play of various factors. The corporates have shifted focus to other avenues for raising resources like private placement where compliance is much less. Available data, although scanty, indicate that private placement has become a preferred means of raising resources by the corporate sector. Private placement contributed about Rs. 65,000 crore during 2001-02. The corporate sector raised a total Rs. 74,403 crore during 2001-02 from the securities market. The market is getting institutionalised as people prefer mutual funds as their investment vehicle, thanks to evolution of a regulatory framework for mutual funds. The net collections by mutual funds picked up during 1990s and increased to Rs. 19,953 crore during 1999-2000. Starting with an asset base of Rs. 25 crore in 1964, the total assets under management at the end of January 2003 was Rs. 121,806 crore.

Along with increase in fiscal deficits of the governments, the dependence on market borrowings to finance fiscal deficits has increased over the years. During the year 1990-91, the state governments and the central government financed nearly 14% and 18% respectively of their fiscal deficit by market borrowing. In percentage terms, dependence of the state governments on market borrowing did not increase much during the decade 1991- 2001. In case of central government, it increased to 69.4% by 2001-02. The central government and the state governments together borrowed Rs. 110,510 crore from marketduring 2001-02 against Rs. 10,557 crore in 1990-91.

The primary issues of the Central Government have increased many-fold during the decade of 1990s from Rs. 8,989 crore in 1990-91 to Rs. 133,801 crore in 2001-02. The issues by state governments increased by about five times from Rs. 2,569 crore to Rs. 18,707 crore during the same period.

According to RBI data, household sector accounted for 89% of gross domestic savings during 2000-01. They invested only 4% of their savings in securities, including government securities and units of mutual funds during 2000-2001. The share of financial savings of the household sector in securities (shares, debentures, public sector bonds and units of UTI and other mutual funds and government securities) is estimated to have gone down from 22.9% in 1992-03 to 4.3% in 2000-01

The Society for Capital Market Research and Development carries out periodical surveys of household investors to estimate the number of investors. Their first survey carried out in 1990 placed the total number of share owners at 90-100 lakh. Their second survey estimated the number of share owners at around 140-150 lakh as of mid- 1993. Their third survey estimates the number of shareowners at around 2 crore at 1997 end. According to the SEBI- NCAER survey of Indian investors conducted in early 1999, an estimated 12.8 million, or 7.6%, of all Indian households representing 19 million individuals had directly invested in equity shares and or debentures as at the end of financial year 1998- 99. An estimated 15 million, or nearly 9%, of all

The disinvestment programme in India would not have been successful if it did not have a well developed securities market. So far, Government of India has been able to disinvest to the tune of over Rs. 31, 000 crore, including about Rs. 5,000 during the current fiscal.