First a comment on my previous blog post in this series: Creating Liquid and Efficient Markets
"Consider the last 2 weeks turmoil in the financial markets. On Aug 24 the markets dropped by around 1000 points as fears from slow down in China and the US rate increases created a flight to safety in the markets. As the money moved out of Indian equities, the Rupee dropped to a 12 month low to 67 to a US Dollar. Subsequently, as the rate hike fears in USA were eased and the Chinese government reduced the rates, the markets recovered and so did the Rupee to 65 to a US Dollar. Now suppose we had a robust and liquid corporate bond market open to foreign investors. The money that moved out of equities at the start of the down swing, would have moved into corporate bonds and the Rupee would not have been hit so hard."
The suggestions given in the section on market refoms have been alluded to in earlier sections of the report and so have been superficially covered in the previous blog posts in this series. I find the treatment in the report to be very complete and am unable to contribute to the suggestions expressed in any way. So I would suggest the reader to read this section on the report on pages 133 to 135 here: A Hundred Small Steps: Raghuram Rajan
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