The link, if any, between economic growth and stock market performance in India.
The stock market is often viewed as an indicator of economic performance. Buoyant markets are seen as signs of 'investor confidence', which is implicitly seen as characterising the real economy as well. However, in India's case this is only partially true. Since the early 1950s stock market performance has been a poor indicator of real economic activity in India, except for a brief period between 2003 and 2011, when the two were strongly linked. Since 2011, the stock market is booming despite the slowdown in economic growth.
A third market boom-bust cycle may be on the horizon: the stock market has hit new highs despite slower GDP growth.
If the government further cuts public expenditure to prop up the stock market, the economy could witness contraction.
Addressing the health of public sector banks is key to reviving lending to viable borrowers -- and promoting sustainable growth.
