ABSTRACT
In this chapter, the authors explore intersectoral relations using the input–output matrices for the Indian economy. They apply rolling recursive co-integration to study the movement of finance, insurance, real estate and business services (FINREBS) vis-a-vis other sectors using quarterly data. The authors consider the connectedness question using forecast error variance decomposition of time series data. The results validate low linkages of FINREBS as compared to most other sectors of the economy. Financialisation creates space for transactions in the financial sector of economies and helps to raise the share of activities in FINREBS economy. Crony capitalism played its part with banks overextending themselves to lend to certain big players. Financialisation of commodity markets provided another avenue for short-term gains. Stock markets in India saw a long period of boom with rising market capitalisation and price/earnings ratio abetted by foreign portfolio flows till the time expectations turned adverse and from a boom period the system transited to panic and crash.
