Dating the Indian Business Cycle: Is Output All That Counts?

Since 1996, the Central Statistical Organisation has been publishing a quarterly series for GDP. Given that such a broad measure of economic output is now available on a quarterly basis for India, one may ask whether this series alone should now be all that is needed to date the Indian business cycle. We argue strongly against this. To do so, in our view, would be at odds with what is meant by the notion of “the business cycle” as conceived by the original architects of the concept at the National Bureau of Economic Research. In arriving at a proper business cycle chronology it is of course crucial to have first a clear understanding of what properly constitutes the business cycle. This paper will argue that, in addition to an output dimension, there are other important dimensions to aggregate economic activity, which must be considered in determining a chronology for the business cycle. This view is in contrast to those who argue that GDP is all that is needed to represent a country’s business cycle. Of course, our view also implies that basing the Indian business cycle chronology just on industrial production, a much narrower monthly measure of output, is even less appropriate.