In the recent edition of Macroscan - What explains the high GDP growth?, C. P. Chandrasekhar and Jayati Ghosh analyzed the main contributing factors for high GDP growth in India. They have opined that the major contributing factor was the free capital inflow in the country and adverse global conditions can adversely affect the GDP growth.
They have based their argument on the investments in sectors like real estate. However one point that they should have analyzed is the foreign investments in liquid assets; real estate investments are not liquid as compared to equity markets and capital outflow during financial distress is not easy.
Wednesday, September 19, 2007
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