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An Indicator Approach to Business and Growth Rate Cycles: The Case of India

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Author Info

  • Pami Dua

    (Delhi School of Economics and Economic Cycle Research Institute)

  • Anirvan Banerji

    (Economic Cycle Research Institute)

Abstract

Over the last few decades, the Indian economy has experienced both classical business cycles and the cyclical fluctuations in its growth rate known as growth rate cycles. In the years since the liberalization of the economy began, these cycles have been driven more by endogenous factors than by exogenous shocks. From the point of view of both policy makers and business, therefore, it is important to find a way to predict Indian recessions and recoveries, along with slowdowns and speed-ups in growth. This paper adopts a classical leading indicator approach to the problem. In earlier work (Dua and Banerji, 1999), we used the classical NBER approach to determine the dates of Indian business cycles and growth rate cycles. These dates are used as the reference chronology against which to evaluate the performance of potential leading indicators for the Indian economy. The indicators selected are combined into a composite index of leading economic indicators, designed to anticipate business cycle and growth rate cycles upturns and downturns. Given the paucity of suitable data for the Indian economy, the construction of such a leading index constitutes a significant advance. It also confirms that that the durable sequences of leads and lags seen in free market economies are now also evident in the Indian case, permitting useful forecasts of cyclical turning points.

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Bibliographic Info

Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

Volume (Year): 36 (2001)
Issue (Month): 1 (January)
Pages: 55-78

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Handle: RePEc:dse:indecr:v:36:y:2001:i:1:p:55-78

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Cited by:
  1. Paul, Biru Paksha, 2009. "In search of the Phillips curve for India," Journal of Asian Economics, Elsevier, vol. 20(4), pages 479-488, September.
  2. Ghate, Chetan & Pandey, Radhika & Patnaik, Ila, 2011. "Has India emerged? Business cycle facts from a transitioning economy," Working Papers 11/88, National Institute of Public Finance and Policy.
  3. Chetan Ghate & Radhika Pandey & Ila Patnaik, 2011. "Has India emerged? Business cycle stylized facts from a transitioning economy," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 11-05, Indian Statistical Institute, New Delhi, India.

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