For the sake of analysis, it is sometimes useful to divide the economy into two slices: the financial sector and the real sector. Quite often, the developments in a country’s stock markets serve as a harbinger of what could happen in the real economy.
The trends in a country’s equity markets are among the most noticeable markers in an economy. Indian markets have vaulted to a $3 trillion market capitalisation last week. This begs the question: Is the real economy on the verge of a takeoff too?
Let’s examine this.
Ceteris paribus, Latin for other things remaining the same, is the most basic assumption in any economic modelling and analysis. For instance, the relationship between demand and price of a good.