Someone asked me - Has the financial economy become much bigger and influential than the real economy? How does one explain this drastic fall in stock market valuations despite the promise of India growth story? How could one explain the dramatic rise in the stock markets?  That was a bubble, driven by overgrown brats spoilt by easy money from the West.  The problem was that we started to believe that these guys knew what they were doing.   Now we know, they were just following the herd as mindless cattle are prone, and bred, to do.

It is not whether financial or real economy is larger.  They are both components of the same animal – and each influences the other, rather, should influence the other.  For a while, it seems the financial side stopped heeding the signals coming in from the real side.  Hopefully that will be corrected now.

Last 5 posts by Laveesh Bhandari

• Irrelevance of the State and Naxalites - September 25th, 2009
• Handling Naxalites - August 8th, 2009
• Trust and economic foundations of peaceful progress - August 8th, 2009
• What education? - August 7th, 2009
• Need for introspection - August 7th, 2009

Tags: financial sector, real sector

This entry was posted on Monday, March 30th, 2009 at 1:51 pm and is filed under Indian Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.