What explains the apparent paradox in the India economy with evident divergence in its booming financial sector and subdued economy. What are the risks involved in such situations? Suggest the measures to deal with such situations. 10 marks

Mentor’s comment-
  • https://www.thehindu.com/opinion/lead/financial-boom-at-a-time-of-economic-stagnation/article33595248.ece
  • In the intro, mention the apparent paradox in which country’s financial sector has been booming while its economy is facing stagnation.
  • In the body, explain the flows in the finance and the idea of fictitious capital and how its demand increases. In the challenges mention the risk of collapse of the financial market due to the lack of real economic backing to the boom in the financial market if there is sudden fall in the confidence in the finance market.
  • Conclude by mention the need for government intervention in such situations.
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