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Indian Economy

Notes shares had to be followed by deliveries. It suspended all the broker member directors of
BSE’s governing board. SEBI also banned trading by all stock exchange presidents,
vice-presidents and treasurers. A historical decision to ban the badla system in the country
was taken, effective from July 2001, and a rolling settlement system for 200 Group A
shares was introduced on the BSE.
The small investor was feeling deceived as he believed that all the parties working in the
stock exchange are responsible for the Scam. SEBI’s measures were widely criticized as
being reactive rather than proactive. The market regulator was blamed for being lax in
handling the issue of unusual price movement and tremendous volatility in certain shares
over an 18-month period prior to February 2001.
Many exchanges were not happy with the decision of banning the badla system as they felt
it would rig the liquidity in the market. Analysts who opposed the ban argued that the ban
on badla without a suitable alternative for all the scrips, which were being moved to
rolling settlement, would rig the volatility in the markets. They argued that the lack of
finances for all players in the market would enable the few persons who were able to get
funds from the banking system – including co-operative banks or promoters – to have an
undue influence on the markets.
Ketan Parekh was released on bail in May 2001. The scam had set back the Indian economy
by at least a year. It is not Ketan Parekh rather it is the system which gave the room to
persons like Ketan Parekh to do such thing which cost India around ` 2000 billion not a
small amount for a developing nation.
Questions
1. Discuss the SEBI decisions after the scam was revealed.

2. Do you think that SEBI’s decision of banning the badla system was right? Discuss it.
3. Discuss in detail the modus operandi of Ketan Parekh.
Source: Business Environment, Dr Vivek Mittal, Excel Books

4.6 Summary

India is a developing country of the world and because of this it is using the resources
efficiently and more precisely.
It is dealing with the growth rate and saving rate more carefully in order to grow faster
than before.

But due to various reasons like population, corruption India is again expecting a slower
growth of 7.5-8%.

So we can say that the capital formation is one of the most important parts of the Indian
economy to have a good developing speed.

4.7 Keywords

Current Account Deficit: It occurs when a country’s total import of goods, services and transfers
is greater than the country’s total export of goods, services and transfers.
Economic Development: It refers to the sustained, concerted actions of policy makers and
communities that promote the standard of living and economic health of a specific area.
Five Year Plan: The Five-Year Plans of India are a series of economic development initiatives.

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