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-Rajeev Kumar (Editor-in-chief)

Friday, November 13, 2020

Kudos, RBI, for the new Activity Index

It is welcome that the Reserve Bank of India (RBI) is essaying real-time data analyses for more-accurate forecasting and better-informed policymaking. Its latest monthly bulletin presents an Economic Activity Index that incorporates 27 high-frequency indicators to gauge the dynamics of growth and output.


The maiden attempt at constructing a composite and dynamic economic index for India needs to be fine-tuned, to duly optimise policy decisions. The number-crunching reveals quick recovery in manufactures post-Covid lockdowns; however, contact-intensive sectors like hospitality remain stressed. Leading central banks have lately been using new econometric modelling techniques and computing power to integrate continuously flowing information into their forecast models. And RBI has now followed suit to ‘nowcast’, or conditionally forecast, the current quarter growth by factoring in real-time activity across sectors to identify consistent economic patterns.


The idea is to use machine learning tools and artificial intelligence to project GDP numbers going forward, taking into account high-frequency data releases. The 27 indicators include the monthly Index of Industrial Production, rail freight, tax collections, oil prices, power supply and steel output, besides Purchasing Managers’ Indices. The omission of the Google Mobility Index is odd. There has to be a greater focus on GST data, apart from gross collections.


Growing digitisation lends itself to more and more sophisticated analytics. The new index needs to be standardised, formalised and continuously constructed to be useful for policy purposes. It is time the Central Statistics Office identified a set of leading, concurrent and lagging economic indicators to project growth.

Courtesy - The Economic Times.

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Help Sampadkiya Team in maintaining this website

इस वेबसाइट को जारी रखने में यथायोग्य मदद करें -

-Rajeev Kumar (Editor-in-chief, Sampadkiya.com)

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