The Hindu Business Line : Use GDP, IIP data to track growth: Panel

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Mumbai Jan. 23 A technical advisory group of the Reserve Bank has suggested using quarterly gross domestic product (GDP) and monthly index of industrial production (IIP) data to track economic growth.

The RBI set up the Technical Advisory Group on "Development of Leading Economic Indicators for Indian Economy" in March 2006. This was in view of the need to regularly monitor the movements of the country's economy based on appropriate methodology and international best practices.

According to an RBI release, the group has observed that a majority of conventional leading indicators used in the developed economies are not available at monthly or quarterly intervals in the Indian context.

However, since the RBI is undertaking monetary policy review at quarterly intervals, inputs on movements of economic growth for quarterly reviews should also of the same or higher frequency, the group feels.

It has recommended that that the lead period in the case of quarterly data (non-agricultural GDP) should be at least two quarters ahead and in the case of monthly IIP data, four months ahead. This is because the information on the turning points in the economic activity is needed well in advance as the monetary policy measures impact after a certain lag.

Indicators

Besides, information on some important indicators such as employment, wages, sales, order books, inventory, savings and investment needed to be compiled at least at quarterly intervals so that they could be used to capture the turning points in the economy.

The group has also stressed the importance of developing institutional capabilities for undertaking work on leading indicators. In this context, it has suggested that in the initial stages, the RBI should play a pivotal role in the area of business cycle analysis.

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