The Modi government is going ahead with the dream of making the country a developed India by 2047. PM Modi has also mentioned this at different forums. Now, Dr V. Ananth Nageswaran, Chief Economic Adviser (CEA) to the Ministry of Finance, has warned the country about the need to avoid financialisation while moving towards the goal of becoming a developed nation by 2047 and said that India’s economic growth prospects are one of the brightest global prospects.
This must be taken into account
Nageswaran said that India’s stock market capitalisation is about 140 per cent of the gross domestic product (GDP). The record profitability of the Indian financial sector and the high level of market capitalisation, or the ratio of market capitalisation to GDP, raise another factor that requires close scrutiny. CEA said that when the market becomes larger than the economy, it is natural, but not necessarily appropriate, for market views and priorities to dominate public discussion and also influence policy discussion. I am referring to the phenomenon or policy called financialisation and the dominance of financial markets over macroeconomic outcomes.
What is financialization?
Speaking at the CII Financing 3.0 Summit, he said financialisation means mastering financial market expectations and, more importantly, taking an interest in public policies and macroeconomic outcomes. However, he clarified that these are his personal views and not any statement given as Chief Economic Adviser. Nageswaran said it is important to maintain policy autonomy and protect the economy from the uncertainties of global capital flows. India is dependent on global capital flows despite running a modest current account deficit.
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He said India’s economic growth prospects are the brightest in the world. It is up to us to sustain it. At the same time, it is also up to us to use it to create policy space for ourselves. He said that in short, the country will have to strike a fine balance between national imperatives and investor interests or priorities.
