New Delhi, Sept. 7 -- How large are India's corporate profits? Whenever this question is raised (or if you Google it), the response would be something like this: "Corporate profits in India have more than doubled in the post-pandemic period from about 2% of GDP to 5-5.5% now." This answer is correct, but partial and thus misleading. This response pertains to only listed (or BSE500) companies, not the country's overall corporate sector.

A macroeconomic identity, which we call the 'Theory of Everything,' says that total investments in an economy are equal to the sum of gross domestic savings and the current account deficit (CAD). In simple words, every paisa invested must be financed either by domestic savings or foreign borrowings (repres...