Rising stock markets amid GDP contraction pose risk of a bubble, says RBI

'The widening gap between stretched asset prices relative to prospects for recovery in real economic activity emerged as a global policy concern,' RBI said in a note

The central bank, in its annual report, has issued caution over the meteoric rise in stock prices at a time when the country’s gross domestic product (GDP) has contracted.

India’s benchmark indices have more than doubled from the post-pandemic lows made in March 2020. Several individual companies have seen multi-fold jump in their stock prices. This, even as the economy has headed south.

“This order of asset price inflation in the context of the estimated 8 per cent contraction in GDP in 2020-21 poses the risk of a bubble,” the Reserve Bank of India (RBI) has said.

Not just India,