NEW DELHI: Senior Congress leader Jairam Ramesh on Thursday, 20 February, raised concerns over India’s rising stock market capitalization. He cites warnings from both government officials and financial experts about the risks of over-financialization.
In a post on X (formerly Twitter), Ramesh noted, “India’s stock market capitalization currently stands at approximately 140 percent of its GDP.”
He referred to a statement made by the Chief Economic Adviser (CEA) on September 2, 2024, cautioning that the “growing profitability of the financial sector and high levels of market capitalization require closer scrutiny.”
The CEA further warned, “When the market becomes bigger than the economy, it is natural, but not necessarily reasonable, that the market’s considerations dominate public discourse and influence policy.”
Ramesh also quoted Uday Kotak, one of India’s most respected financial leaders, who echoed similar concerns. Ramesh wrote, “One of India’s most respected financial leaders has also highlighted the risks of excessive financialization.” According to him, Kotak has warned that “over-financialisation can hurt the Indian economy as investors move their savings into equities without understanding valuations.”
Ramesh called for a complete overhaul of the Securities and Exchange Board of India (SEBI) and emphasized the need to strengthen global manufacturing ecosystems for sustainable economic growth. He stated, “We need more professional regulation of our financial markets. SEBI needs a total overhaul. We also need a relentless focus on global manufacturing ecosystems across the technology spectrum to carve out niches for India. It is still not too late.”
His remarks come at a time when India’s stock markets have been witnessing record highs, raising concerns over whether financial market expansion is outpacing real economic growth.
Experts have repeatedly called for regulatory vigilance to prevent market distortions and ensure long-term economic stability. Some analysts argue that while a booming stock market reflects investor confidence, unchecked financialization without real-sector growth could lead to instability.
