ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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On the Wrong Track

THE exaggerated level of activity in the financial sector, including the capital market, is a prominent aspect of the present macro-economic scene in the country. The bulk of the liquidity arising from the build-up of foreign exchange reserves has been soaked up by the financial sector, essentially i n the form of higher market capitalisation of financial assets. The policy-makers are apparently convinced that encouraging financial free-wheeling is the surest way to stimulate the growth of the real economy. Growth of some kind may indeed result, but if public policies ignore the need for checks and balances to secure a degree of evenness in the spread of the benefits of development as between classes, sectors and regions, serious distortions will ensue. Every major aspect of financial policy today is unfortunately calculated to produce such distortions.

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