......Reverting to substantive issues, is there any empirical evidence to support the thesis that financial engineering can by itself, generate real growth? RBI Governor D Subbarao, has given a convincing answer to this question in his foreword to the RBI’s Financial Stability Report ( No. 7 issued in June 2013): “ In the years before the global financial crisis of 2008, the financial sector took on a life of its own with a growing belief that real growth can be generated by sheer financial engineering. That myth is now demolished. We now know that the financial sector has no standing of its own: it matters only to the extent that it aids the growth of the real sector. It is this wisdom that must guide the ongoing global effort at financial sector reforms: it is this wisdom that must inform the Reserve Bank’s policies and actions.” The financial system can aid but not generate real growth.............
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