India Joins Trillion-Dollar Club

He feels that the economy as the “source of wealth” has contributed to and has, in turn, been catalysed by the stockmarkets that serve as the “measure of wealth”. The interplay of real and nominal GDP, inflation, earning per share (EPS) and price to earning ratio has meant that at first the markets rose due to an EPS expansion. In a report, Credit Suisse, adding some history trivia, says that eight out of the 10 economies had their stockmarkets rise in the one-year period after they first crossed the $1 trillion-mark in GDP. The United Kingdom is the only economy to stop being a trillion-dollar economy for a while after attaining the status the first time. In China and Germany, this led to the markets reversing directions from negative returns in the year of the $1 trillion-mark to positive returns in the following year. Experts though argue that these numbers are irrelevant for any fundamental analyst. Says Sachchidanand Shukla, economist at Enam Securities: “We must remember that markets discount these factors much in advance and expressing economic size in dollar terms may actually understate India’s economic size. As for economy (size and structure) driving the markets, empirical evidence has been mixed globally, and the opposite can also be argued — that markets drive economic growth. One has seen that in countries like China, despite higher economic growth and large size of economy, the markets remained moribund for a long period of time and have moved only lately.” ... http://economictimes.indiatimes.com/India_joins_trillion-dollar_economy_club/rssarticleshow/2568337.cms

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