Developing a Business Conditions Index for Indian economy

For the technically gifted, here is a nice paper from RBI economists – Dipankar Biswas, Nivedita Banerjee and Abhiman Das.

Business Conditions Index is a composite indicator which helps track the business cycle real-time. It combines economic variables to generate an index which tell you whether economy is doing good or bad.

It gives a framework to develop a business conditions index for India On the lines of  Aruoba-Diebold-Scotti Business Conditions Index for US economy.

The authors show their business conditions index tracks Indian business cycle quite well.

Chart 10 displays the cyclical movements of NAGDP and Index of Industrial Production (IIP), along with the daily movement of RTBCI. It is observed that, there is a coincidental movement among these three series. The movement of RTBCI beyond the vertical redline indicates the state of the economy which is otherwise not observed from the macro aggregates. The momentum as per the RTBCI, as on December 10, 2010, indicates somewhat low acceleration of economic activity. 

One could use the paper to develop their own models…

One Response to “Developing a Business Conditions Index for Indian economy”

  1. University Says:

    In order to develop the economy of the India. That means first small small business has to improve first. when small business are improve then automatically India economy will improved.This is nice article on India economy..

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