India needs to guard against excessive financialisation as it can hurt economy: Economic Survey
Viksit Bharat by 2047, according to the Economic Survey 2024-25. The consequences of financialisation are evident in advanced economies, where it has led to unprecedented levels of public and private sector debt — some visible to regulators and some not, it said.
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«We also caution against the risk of financialisation and asset price bubbles that are now endemic to the West. That is why some measures India's regulators took to rein in excessive and financially ruinous speculation for investors were necessary, not just for systemic stability. They were welfare measures in effect,» it said.
Excessive financialisation can hurt the economy, it said, adding that the costs may be particularly high for a low-middle-income country like India.
Economic growth in such contexts becomes overly reliant on rising asset prices to offset leverage, exacerbating inequality and asset market considerations that may overly influence public policies, particularly regulatory ones, it added.
As India strives to align its financial system with its economic aspirations Viksit Bharat by 2047, it should strive to maintain the fine balance between financial sector development and growth on the one hand and financialisation on the other, it noted.
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