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Business News/ Opinion / Are we back in bubble territory again?
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Are we back in bubble territory again?

Are we back in bubble territory again?

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And the paper’s edit pages team called for an increase in the policy rate ahead of Friday’s monetary policy (as it turned out, that wasn’t to be, but the central bank still did enough to remove around Rs36,000 crore of money from the market).

Which brings us to the original question.

If there are indeed asset bubbles being created around us—in stocks and real estate, to name just two—and if there is too much money in the market, at what rate is the Indian economy growing?

After all, it can be argued that one reason why real estate prices are going up is because people are again willing to pay for residences and offices, rates that they would have considered ridiculous anytime in the past 18 months.

And that, by extension, means that they have the money (or expect to have the money; demand for mortgages has increased) to pay for these properties.

Illustration: Jayachandran / Mint

Now, as most of us know, and some of us have learnt over the past year and a half, the Goldilocks economy is as real as the character after which it is named, and all signs around us are that, at least in some sectors things are getting way too hot.

It could be that a recovery as sharp as the one we have seen, and are continuing to see, is required to erase the bad memories of late 2008 and early 2009 but if some parts of the industry and the economy are growing at double-digit rates as the chairman of one of the country’s largest banks?told a fellow editor and me on Thursday, then there is a definite risk of overheating—again, in parts.

Again, anecdotal evidence would seem to suggest so.

The daily papers are filled with ads for cars and car loans. Ads for real estate developments are back, and, after a gap of 18 months, both the developers and the reading (and consuming) public seem to have gone back to the belief that Rs1 crore is a base price, not a ceiling for houses.

As editor of a paper that (like other papers) depends on ads to make money, I can’t help but cheer the development. But I also can’t help but think of how Scott Fitzgerald ends The Great Gatsby, which remains one of the finest books written about (economic) booms and busts. “And so we beat on, boats against the current, borne back ceaselessly into the past."

Write to acuteangle@livemint.com

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Published: 29 Jan 2010, 09:55 PM IST
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