Market integration in India refers to the process of bringing together different financial markets, such as the equity market, debt market, and currency market, to create a more seamless and efficient financial system. The achievement of market integration in India has been a gradual process, driven by various reforms and initiatives over the past few decades. Some of the key achievements in market integration in India include:
- Introduction of the National Stock Exchange (NSE): The NSE, which was established in 1992, played a key role in the integration of the Indian equity market. The NSE introduced electronic trading and a centralized order book, which reduced transaction costs and increased market transparency.
- Integration of the cash and derivatives markets: In 2000, the Securities and Exchange Board of India (SEBI) allowed the trading of equity derivatives, which helped to integrate the cash and derivatives markets. This allowed investors to hedge their equity market exposures and provided greater liquidity to the equity derivatives market.
- Introduction of the Unified Payments Interface (UPI): The UPI, which was launched in 2016, has helped to integrate the Indian banking system. The UPI allows instant fund transfers between bank accounts, which has helped to reduce transaction costs and improve the efficiency of the payments system.
- Integration of the commodity markets: In 2017, SEBI allowed the trading of commodity derivatives, which helped to integrate the commodity markets with the equity and currency markets. This allowed investors to trade in multiple asset classes and provided greater liquidity to the commodity derivatives market.
- Implementation of the Goods and Services Tax (GST): The GST, which was implemented in 2017, helped to integrate the Indian economy by creating a single tax system across the country. This has reduced the complexity of the tax system and improved the efficiency of cross-border trade.
- Introduction of the RBI’s Liquidity Adjustment Facility (LAF): The LAF, which was introduced in 2000, helped to integrate the Indian money market. The LAF allows banks to borrow from the Reserve Bank of India (RBI) at a predetermined rate, which helps to manage liquidity in the banking system.
In summary, the achievement of market integration in India has been driven by various reforms and initiatives that have helped to create a more seamless and efficient financial system. The integration of different financial markets has helped to reduce transaction costs, increase market transparency, and provide greater liquidity to the markets.