Question 87 from UPSC CSE 2023 - Economics

Question

Consider the following markets:
1. Government Bond Market
2. Call Money Market
3. Treasury Bill Market
4. Stock Market
How many of the above are included in capital markets?

IASCODEX · Accepted Answer

Correct Option: B. Only two

Strategy: *   Differentiate capital markets (long-term securities) from money markets (short-term funds).
*   Categorize instruments: long-term (e.g., government bonds, stocks) and short-term (e.g., call money, treasury bills).
*   Exclude options that misclassify short-term instruments as capital market components.

Key Info: Capital markets are financial markets for buying and selling long-term debt or equity instruments. Typical participants include stock exchanges, bond markets, and mutual funds.

### Key Market Types

*   **Government Bond Market**
    Focuses on long-term government securities (such as Central and State Government bonds in India) with maturities typically above one year. Bonds are tradable instruments, forming a core segment of capital markets.

*   **Stock Market**
    Enables trading in equity shares of companies. As equity instruments represent long-term ownership, all stock exchanges (such as NSE, BSE) are categorically capital markets.

*   **Treasury Bill Market**
    Handles government-issued short-term instruments called T-Bills (typically 91, 182, or 364 days maturity). This is part of the money market, not the capital market.

*   **Call Money Market**
    Facilitates overnight or short-term borrowing and lending, primarily between banks and financial institutions. Funds are usually lent for 1-14 days, making this a core element of the money market.

Capital markets contribute to capital formation and economic development, whereas money markets serve short-term liquidity and cash management needs. In India, the Securities and Exchange Board of India (SEBI) regulates the capital markets.

IASCODEX · Answer

Option A: Only one

IASCODEX · Answer

Option C: Only three

IASCODEX · Answer

Option D: All four

Consider the following markets: Government Bond Market Call Money Market Treasury Bill Market Stock Market How many of the above are included in capital markets?

Consider the following markets:

Government Bond Market

Call Money Market

Treasury Bill Market

Stock Market
How many of the above are included in capital markets?