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Classification of Indian Market

    IndianMoney.com Research Team | Thursday, April 30,2009, 07:18 PM
 

The Indian Market can be broadly classified under the following heads :

Commodity Market

The huge geographical amount of India and her huge population is appropriately complemented by the size of her market. The broadest categorization of the Indian Market can be made in terms of the commodity market and the bond market. Here we deal with the former in a little detail. The commodity market in India comprises of all palpable markets that we come across in our daily lives. Such markets are social institutions that facilitate exchange of goods for money. The cost of goods is estimated in terms of domestic currency. Indian Commodity Market can be subdivided into the following two categories :

Wholesale Market


The established wholesale market in India dealt with whole sellers who bought goods from the farmers and manufacturers and then sell them to the retailers after making a profit in the process. It was the retailers who finally sold the goods to the customers. The passage of time the significance of whole sellers began to fade out for the below reasons :
  • The whole sellers in the majority situations acted as mere parasites who did not add any value to the product but raised its price which was ultimately faced by the consumers.
  • The development in transport facilities made the retailers openly interact with the producers and consequently the need for whole sellers was not felt.

Retail Market


In current years the amount of the retail market both organized and unorganized has evolve in leaps and limits. In fact the success stories of the commodity market of India in recent years has largely centered on the growth generated by the Retail Sector. Almost every commodity under the sun both agricultural and industrial are now being provided at well distributed retail outlets.

Likewise the retail outlets belong to both the prepared as well as the unorganized sector. The unorganized retail outlets of the yesteryears consist of small shop owners who are cost takers where consumers face a highly competitive price organization. The organized sector on the other hand is owned by various business houses like Pantaloons, Reliance, Tata and others. Such markets are usually selling a wide range of articles both agricultural and manufactured, edible and inedible, perishable and durable. Current marketing strategies and other techniques of sales encouragement enable such markets to draw customers from every section of the society. However the increase of such markets has still centered around the city areas primarily due to infrastructural limits.

Considering the present growth rate the total valuation of the Indian Retail Market is predictable to cross Rs. 10,000 billion by the year 2010. Demand for commodities is likely to become four times by 2010 than what it presently is.

Labor Market

The Indian labor market can be categorized into three sectors :

  • Rural workers , who constitute about 60% of the workforce
  • Organized of the formal sector, that constitutes about 8% of the workforce; and
  • Urban unorganized or informal structure which represents the 32% of the workforce.

Two-third of India’s labor force is working in agriculture and rural industries. One-third of rural households are agricultural labor households, subsisting on wage employment. Only about 9 percent of the total workforce is in the prearranged sector; the remaining 91 percent are in the unorganized sector, self-employed and employed as casual wage laborers. The labor force in year 2006 has grown up to 509.3 million out of which 60% are in agriculture 12% are employed in industries and the remaining 28% are in services.

Labor force can be divided into four categories

  • Self employed workers
  • Wage and salary earners
  • Casual workers
  • Unemployed

Self-employed are most heavily associated to labor market because of the possibilities of work-sharing and work spreading in a self-employed enterprise. Non-contractual casual laborers have the closest connection to labor market on almost day-to day basis. Same is the case with those unemployed who are aggressively looking for work. Contractual and therefore steady hired employment (with the same employer and/or in the same job) on a normal basis is enclosed in the description wage and salary workers. Persons who are occupied in their own farm or non- farm enterprises are defined as self employed. The employees in an enterprise can be either regular salaried/ wage employees or casual wage employees who are normally engaged on a day today basis. The casual wage workers both in public work and other types of work don’t have any job safety or social security. These workers moreover in formal or informal sector or in private households are informal workers. The regular salaried/wage workers are those working in others farm or non- farm enterprises and receiving in return salary or wages on a normal basis and not on the basis of daily or periodic renewal of work contract. This category includes those receiving time wage as well as those receiving piece wage or salary and paid apprentices both full time and part time. This group of persons may therefore include persons occupied regularly on an hourly basis temporary workers out- workers etc. The table known below classifies labor force across male-female and rural-urban dimensions. It is clear that

  • Self-employment and casual labor statuses are more common among rural than urban labor force and between female than male workers.
  • The occurrence of unemployment is higher in the urban than in the rural labor force with nearly 48% of the total unemployed persons coming from collective urban labor force whose share in total (rural plus urban) work force is 22%.
  • Those coverage wages and salary earning dominate in the urban labor force, their share being around 62% (lines 10 to 12 of Table).

Capital Market

The capital market is the market for securities where companies and governments can increase long term funds. Selling stock and selling bonds are two ways to produce capital and long term funds. Thus bond markets and stock markets are measured capital markets. The capital markets consist of the primary market where new issues are spread to investors and the secondary market where accessible securities are traded. The Indian Equity Markets and the Indian Debt markets mutually form the Indian Capital markets

The Indian Equity Market depends largely on monsoons, global funds flowing into equities and the performance of various companies. The Indian Equity Market is almost wholly dominated by two major stock exchanges -National Stock Exchange of India Ltd. (NSE) and The Bombay Stock Exchange (BSE). The benchmark indices of the two exchanges - Nifty of NSE and Sensex of BSE are closely followed. The two exchanges also have an F&O (Futures and options) section for trading in equity derivatives including the indices. The main players in the Indian Equity Market are Mutual Funds, Financial Institutions and FIIs instead of mainly Venture Capital Funds and Private Equity Funds.

Indian Equity Market at present is a profitable field for investors. Indian stocks are profitable not only for long and medium-term investors but also the position traders, short-term swing traders and also very short term intra-day traders. In India as on December 30 2007 market capitalization (BSE 500) at US$ 1638 billion was 150 per cent of GDP matching well with other rising economies and selected matured markets.

For a developing economy like India, debt markets are critical sources of capital funds. The debt market in India is amongst the major in Asia. It includes government securities, public sector activities, other government bodies, financial institutions, banks and companies.

Money Market

The money market of India involves all monetary transactions. It is further divided under the following two categories.

  • Currency Market
  • Bond Market

Money Market Mutual Funds

A money market fund is a mutual fund that invests exclusively in money market instruments. Money market instruments are forms of debt that grown-up in less than one year and are very liquid. Treasury bills make up the bulk of the money market instruments. Securities in the money market are relatively risk-free.

Money market funds are generally the safest and most secure of mutual fund investments. The goal of a money-market fund is to preserve principal while yielding a modest return. Money-market mutual fund is similar to a high-yield bank account but is not completely risk free. When investing in a money-market fund notice should be paid to the interest rate that is being offered.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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