Question

Discuss the role of Financial Market.

Answer 1

1. Savings Mobilization: Obtaining funds from the savers or ‘surplus’ units such as household individuals, business firms, public sector units, Government is an important role played by financial markets.
2. Investment: Financial market plays a key role in arranging the investment of funds thus collected, in those units which are in need of the same.
3. National Growth: Financial markets contribute to a nation’s growth by ensuring an unfettered flow of surplus funds to deficit units. The flow of funds for productive purposes is also made possible. It leads to overall economic growth.
4. Entrepreneurship Growth: Financial markets contribute to the development of the entrepreneurial class by making available the necessary financial resources.
5. Industrial Development: The different components of financial markets help an accelerated growth of industrial and economic development of a country and thus contributing to raising the standard of living and the society’s well-being.