 "Countries face crises when financial market ‘innovations’ run ahead of economic growth: Economic Survey 2023-24")
The Economic Survey 2023-24 highlighted the risks associated with financial market innovations that outpace economic growth. It points out that derivatives trading, which can offer substantial gains, often attracts investors due to its potential for high returns.
However, globally, such trading frequently results in losses for investors.
This highlights the need for greater investor education to prevent significant losses, especially for retail investors involved in derivatives.
“When market corrections occur, these investors might face severe losses and could be discouraged from participating in capital markets in the future, which impacts both their personal finances and the broader economy.”
The survey also noted that the financialisation of economies, where financial markets grow faster than the real economy, has led to crises in both developed and developing nations.
The 2008 global financial crisis and the 1997-98 Asian financial crisis serve as stark reminders of the dangers of such mismatches. For India, the survey stressed on the importance of a gradual and orderly evolution of financial markets to avoid similar pitfalls.
“It calls on all stakeholders—including market participants, infrastructure institutions, regulators, and the government—to ensure that capital markets effectively channel savings into productive investments, which is crucial for both national and individual interests”.
Finance Minister Nirmala Sitharaman presented the Economic Survey 2023-24 on Monday, providing an overview of India’s economic performance and outlook.
The survey highlighted the country’s ongoing economic growth while also addressing key challenges and trends affecting various sectors. It offers insights into recent price increases for essential items like vegetables, pulses, and milk, and explains how weather conditions, production issues, and other factors have impacted these prices.
Impact Shorts
More ShortsThe survey also discussed the broader economic landscape and forecasts for the year ahead.
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