Skip to main content Accessibility help
×
Home
  • Print publication year: 2020
  • Online publication date: March 2020

4 - Financialisation in India: Emerging Trends in the Corporate Sector

Summary

Diffusion of capital in the realm of global production structures as well as in financial mediations seems to be the defining feature of the current phase of globalised capitalism. Capital relations tend to make every economic activity of the world subservient to the imperatives of global capital. It imposes a monitoring structure ensuring financial transactions and various forms of mediations between supply of inputs, production and sale commensurate to the norms defined by the global architecture of finance. Production and finance often appear to be separated and financial returns accrue to ‘monied’ capital operating at a distance from production, but profit in any case originates in productive activities that transform and enhance use-values. The relative importance of circulation, as blown out of proportion, and the relative shift of profit share moving away from productive activities to financial transactions is typical to the current phase of capital accumulation.

Notable is the fact that growth of profit seems to move faster than the growth of investment and a trade-off between growth and profitability constrains the decision-making process of an individual firm. It has wider ramifications, giving rise to a puzzle at the macro level which is that profit-making gets increasingly disconnected from production and, as a result, accumulation occurs without commensurate increase in productive employment. A profit growth being increasingly delinked from production and employment inevitably leads to asymmetric distribution and rising inequality in income that ultimately affects the economy's demand structure. But financialisation also permeates household income and savings by creating liquid asset markets which can be readily transacted at reasonable values. Therefore, instead of holding idle money, economic agents will be willing to direct their income to accumulate productive assets. The financial accelerator generates income that is supposed to have a positive feedback on demand for both consumption and investment and hence expected to take care of the widening demand gap emerging out of unequal distribution. In fact, the relative dominance of finance in the current phase of capitalism has been appreciated as nothing new. It happens to be the feature emerging in every systemic cycle of accumulation in the long history of capitalism.

Related content

Powered by UNSILO