write a report on role of money in indian economy

Like in any market, certain goods are traded in the money market too. The good that is bought and sold in the money market is money or near-money financial assets. More precisely, the money market is a market for short-term money and financial assets that are close substitutes for money.

Financial assets of long-term maturity is very much the domain of the investors of the capital market where these long- term securities are traded. ‘Short-term’ in the Indian context means generally a period up to one year.

The term ‘close substitutes for money’ means any finan­cial asset which can be quickly converted into money with minimum transaction/conversion cost.

As we shall see later, the existence of money market helps solve the problem of liquidity management of bodies like corporate banks, financial institutions and the like. It is the money market which meets short-term requirements of borrowers and provides profitable avenues to the lenders.

The broad objectives of the money market are to provide:

(a) An equilibrating mechanism for evening out short-term deficits and surpluses,

(b) A focal point for central bank intervention for influencing liquidity of the economy, and

(c) An access to the users of short-term money to meet their requirements at reasonable price.


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