Inactive Capital Market

Capital market is the backbone of an economy. It is the engine for economic growth that helps to mobilize the resources efficiently. The capital markets play a critical role in economic development since they are the principal platform through which businesses can raise low cost funds to finance projects thereby promoting industrial development. 

The Bhutanese capital market is one of the newest and smallest capital markets in the world. Bhutan's capital market can evolve and become vibrant like any other capital markets around the world. If we want to diversify investment from Hydro-power to other sectors, then, a vibrant capital market is necessary. A good capital market will encourage savings and investments helping investors to create wealth.

A good capital market will foster industrialization in the economy. Through industrialization, a nation can produce most of the goods and services. This would help to fulfill the Bhutan's goal of economic self-reliance. Today, Bhutan is in dire need of industrialization. The unemployment rate is increasingly steadily every year. Lack of industrialization is also putting pressure on the foreign currency reserves especially rupees. Poverty still remains in some nook and corner of the country. The only way to overcome these problems is to establish small, medium and large industries which the capital market has a major role to play. Most industries can thrive if they have access to enough funds for running the business. Therefore, capital market has a critical role in fostering industrialization.

There are many budding entrepreneurs who want to venture into a business. But setting up business require huge amount of capital. Though, Loden Foundation and some financial institutions provide capital, there are many regulatory hurdles that needs to be fulfilled. Moreover, the amount of capital these institutions provide is barely enough for the entrepreneurs to take up the project on a full swing. There is an enormous competition from firms from the neighboring country India. For our industries to thrive and compete with them, substantial capital is required either to develop or import technological know-how. Raising capital from financial institutions is not the best option for the entrepreneurs because many of the businesses involves long gestation period. It is the capital market that has the capacity to provide such huge sums of long term capital through the issuance of shares.

The capital market helps to pool the resources of the country and channel it to industrial activities. For economic growth, a nation requires a lot of domestic and foreign investments. The lack of access to capital has hampered the economic growth and industrial development in the country.

The government and public authorities must realize the importance of the capital market in the economy and start improving the functioning of the existing capital market. To stimulate people to invest in shares and other securities, the government should give greater tax incentives to the investors. The government should also raise funds in the capital market for its developmental activities to develop the capital market. There should be more awareness programme on the importance of making investment in companies’ securities rather than making investment in unproductive assets like cars and electronics.

Capital market plays an extremely important role in mobilizing funds and channeling it to businesses to enhance country's economic growth. It helps to minimize the risk by through diversification in different sectors.