The contribution of banking, finance, and related segments to corporate profits in India is about one-third. On the other hand, the contribution to the gross value added (GVA) is closer to one-tenth. Estimates vary depending on the definitions and data sources but it may be said that the contribution of the broad sector to profits is at least three times its contribution to GVA in the economy! There is a stark difference. Why? And, what can be done about this?
The large profits in the broad financial sector are in the absence of any scams. And, the issue is even more serious if we also consider large bonuses, and various direct and indirect perks for the personnel in the industry. All this is not to say that investment in stocks in banks and the finance sector more generally is necessarily a good idea because the high profits tend to be already incorporated in stock prices.
In the primary market, not only do the investment bankers themselves gain substantially, they also facilitate…
