Why stock market is going up and economy is going down: Ex-CEA Arvind Subramanian

Former Chief Economic Adviser Arvind Subramanian said on December 19 that it was a "puzzle" for him that stock markets are buoyant while the economy is sinking. Subramanian, the first CEA under the Narendra Modi government, was at the Indian Institute of Management Ahmedabad (IIMA) for the inauguration of 'NSE Centre for Behavioral Science in Finance, Economics and Marketing'.

"I hope that the first behavioural economics project of this Centre would be to explain to me why as the economy is going down and down and down, the stock market is going up, up and up", said Subramanian, an alumnus of IIMA. "If you can crack this puzzle for me, I would fly down here all the way from the US to understand it....There are lots of other things I do not understand, (such as) financial markets in India," said the economist who had recently said that India was facing a "great slowdown".

After rallying to its lifetime intra-day high of 41,719.29, the 30-share BSE Sensex on Thursday settled 115.35 points or 0.28 per cent higher at its fresh closing record of 41,673.92.

The NSE Nifty rose 38.05 points, or 0.31 per cent, to its new peak of 12,259.70.

The newly-inaugurated centre on IIMA premises would conduct experiments on how different aspects of behavioural science impact processes and outcomes in markets, said IIMA Director Prof Erol D'Souza in his speech.