Are markets the best indicator for the economy?

"We are living in very optimistic times, or so it seems if one looks at the financial markets," wrote Atul Rastogi. "Equity funds have had a great year -- the average large-cap fund is up more than 20% for the financial year 2017, and mid-caps are doing way better. On 3- and 5- year basis too, the average large cap fund is up 15-17% annually. Even debt funds have had a good run with income funds giving almost 10% returns for past 3 years and long-term gilt funds returning 12% compound annual growth rate." So, we are being told that, even though the markets may correct a bit, it will grow 12-15% over 3-5 years and debt funds will pay more than term deposits in banks with the same level of safety. Will they? A few years back real estate was booming but now it has seized almost completely. Over 37 years returns from equities were over 12% only 50% of the time, 40% of mutual funds have failed to beat the market in the last one year and debt funds may lose value if there is a downgrade. The Sensex has risen by 115 points to, 30,004 points, this morning. There is a lot of good news to account for the optimism, wrote Malini Goyal. India is growing at 7.1%, inflation is down, borrowing costs are low at 6.25%, fiscal deficit of the center is 3.5% and that of the states is 2.7%, for a combined deficit of 6.2% and global confidence in India is growing. Foreign direct investment was $46.4 billion last year. Exports rose by 17.5% in February. Unfortunately, the index of industrial production is down, which is demonstrated by low credit growth to the corporate sector, falling capital expenditure and falling capacity utilization. Capital expenditure is the money spent to increase infrastructure, so as to increase output, and capacity utilization is a measure of productivity. If companies are working at 72.7% capacity it must mean that consumer demand is low. Share prices are rising due to very high inflow of liquidity from central banks which have been buying up assets, which have risen from $6 trillion in 2008 to $18 trillion in March, 2017. The short term bond market is in a bubble zone, feels Saurabh Mukherjea, as investors have poured Rs 4 trillion in 3 years into bonds and liquid funds. Fiscal deficit of state governments is rising. Rising salaries due to the Seventh Pay Commission, competitive populism, such as farmer loan waivers, and making provisions for debts of the electricity sector. States are banning alcohol to get votes of women, which takes away a lucrative source of taxes. Protectionism in rich countries is a risk for India, China and South Africa, said the IMF. Prime Minister Modi's economic policies are mainly to win elections and the results are not going to be good, wrote Mihir Sharma for Bloomberg. Perhaps markets are not the best indicator for the economy.