India should avoid a “financialisation trap” as the dominance of financial markets on policy and macroeconomic outcomes could lead to unprecedented levels of debt in both public and private sector, and a massive surge in inequality, chief economic adviser Anantha Nageswaran cautioned on Monday. The financial sector “should remain the servant of the real economy”, he said at the CII Financing 3.0 Summit in Mumbai. India’s stock market capitalisation of around 140% of the gross domestic product and the record profitability of the financial sector have given rise to a phenomenon which deserves closer examination, the CEA said. Nageswaran’s comments come in the wake of a sharp rise in retail participation in the stock markets, even as the household savings are at a low ebb and indebtedness is high. The Economic Survey 2023-24 had pointed out that the registered investor base at the NSE has nearly tripled from March 2020 to 92 million as of March 31, 2024, indicating 20% of the Indian households are now channelling their savings into financial markets.