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An Application of the Indicator Approach to Developing Coincident and Leading Economic Indexes for India

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Business Cycles in BRICS

Part of the book series: Societies and Political Orders in Transition ((SOCPOT))

Abstract

Business cycle analysis relying on composite indexes provides an understanding of the direction of the economic activity in market economies that is essential for macroeconomic policy formulation and decision making. With the liberalization of the Indian economy since 1991, studies on business cycle for India have received renewed attention in the context of a developing market economy. In this chapter, we describe our proposed business cycle indicators, particularly coincident and leading indicators, that provide tools for tracking and anticipating cyclical movements following The Conference Board’s indicator approach. This approach which is focused on classical business cycles differs from other studies that develop cyclical indicators following growth rate cycles or growth cycles. We begin by proposing a coincident economic index (CEI) that can be used to describe the historical development of the Indian business cycle since 1990. We show that by taking a broad definition of economic activity and the consensus of cyclical movements among several coincident indicators we can obtain a reliable chronology of the reference cycle. We also discuss how this index of coincident indicators can be used to determine a growth cycle chronology. Then, we review a number of leading indicators and propose the selection of indicators as components of a leading economic index (LEI) that help to anticipate the turning points in the business cycle of India’s economy.

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Notes

  1. 1.

    The basic steps involved transformation of each series, standardization of each transformed series using standardization factors, and combination of the standardized series into a raw index. The raw index was then adjusted for trend and finally rebased.

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Author information

Authors and Affiliations

  1. Central University of South Bihar, Patna, India

    Atish Kumar Dash

  2. The Conference Board Inc., New York, NY, USA

    Ataman Ozyildirim & Jing Sima-Friedman

Authors
  1. Atish Kumar Dash
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  2. Ataman Ozyildirim
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  3. Jing Sima-Friedman
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Corresponding author

Correspondence to Ataman Ozyildirim .

Editor information

Editors and Affiliations

  1. Higher School of Economics, National Research University, Moscow, Russia

    Sergey Smirnov

  2. The Conference Board Inc., New York, NY, USA

    Ataman Ozyildirim

  3. Fundação Getulio Vargas, Brazil/IBRE/São Paulo School of Economics, São Paulo, Brazil

    Paulo Picchetti

Appendix

Appendix

Four graphs illustrate the India yield spread, stock prices, real effective exchange rate, and Bank credit to the commercial sector. The Indian yield spread is descending, while others are ascending.

Indicators selected as components of coincident and leading indexes, 1988–2017. Source: The Conference Board Business Cycle Indicators database for India

Four graphs illustrate Indian merchandise exports, cargo handled, I P capital goods, and Service business activity. The service business activity is descending, while others are ascending.
Four graphs illustrate the Industrial production, car sales and passenger vehicle, India's total exports, and exports of agro products. All graphs display increasing trends.

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Dash, A.K., Ozyildirim, A., Sima-Friedman, J. (2019). An Application of the Indicator Approach to Developing Coincident and Leading Economic Indexes for India. In: Smirnov, S., Ozyildirim, A., Picchetti, P. (eds) Business Cycles in BRICS. Societies and Political Orders in Transition. Springer, Cham. https://doi.org/10.1007/978-3-319-90017-9_23

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