The evolution of the securities markets in India in the 1990s

In this paper, we review the changes which took place on India’s equity and debt markets in the decade of the 1990s. In understanding these experiences, we focus on four interesting questions: (a) Why did NSE succeed? (b) Why did the equity market lurch from crisis to crisis? (c) Why did reforms on the debt market falter? (d) How important are crises as a mechanism for obtaining reforms? Looking forward, we argue that the transformation of the market design of the equity market is largely complete, and that the major question that now faces the equity market is that of improvements to investigation and enforcement at SEBI. In contrast, some major questions about market design on the debt market have yet to be addressed. We offer proposals for principles that should be used at RBI in moving forward on the debt market. Finally, we try to address questions of human capital and organisational design at SEBI and RBI. ∗Email [email protected], URL http://www.igidr.ac.in/ ̃ajayshah on the web. We are grateful to C. B. Bhave and John Echeverri-Gent for many ideas and discussions. †Email [email protected], URL http://www.igidr.ac.in/ ̃susant on the web.