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Notice (8): Undefined variable: urlPrefix [APP/Template/Layout/printlayout.ctp, line 8]latest-news-updates/financial-boom-at-a-time-of-economic-stagnation-sunanda-sen.html"/> LATEST NEWS UPDATES | Financial boom at a time of economic stagnation -Sunanda Sen | Im4change.org
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Financial boom at a time of economic stagnation -Sunanda Sen

-The Hindu

The paradox becomes clearer by recognising the circuit of financial flows beyond the real economy

Divergences between the booming financial and the stagnant real sectors, which appear rather confounding as well as disconcerting, warrant an explanation.

Enumerating the facts in India’s major secondary stock market, the Sensex (the benchmark index of the BSE Limited, or formerly the Bombay Stock Exchange Ltd.) has been found tracking an upward path, from 40,817 on January 8, 2020 to 48,569 a year later, on January 8, 2021. In between, the temporary downward slides were responses to the pandemic-related lockdowns during early 2020. Jubilant upward strides in the stock market continued, along with speculatory financial transactions in real estate, gold and even commodities. However, we notice that financial gains booked in the market on transactions do not originate from productive activities in the real economy, a fact which contrasts the floating of shares by enterprises, as initial primary offerings (IPOs) for capacity expansions.

With the start of the novel coronavirus pandemic during April-June (Q1) of 2020, India’s GDP growth rate in real terms sank to a low of minus 23.1%. The deceleration in the second quarter continued at minus 7.5%. The official advance estimate for 2020-21 as a whole also stands at a negative again, of minus 7.5%. GDP in India has been subdued even before the pandemic, declining from 6.12% in 2018 to 4.18% for 2019, while the financial sector has continued moving up.

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