Non-agri GDP can be appropriate reference: RBI

MUMBAI: A working group constituted by RBI has recommended that non-agricultural gross domestic product (in real terms) with quarterly frequency can be considered as appropriate reference series for business cycle analysis in India.
This can be done in view of the predominant role of weather and lower role of interplay of market forces in determining the level of agricultural output, the group recommended in the report submitted to RBI last month.
The Indian economy was continually evolving and was far too complex to be summarised by a single series. Therefore, in addition to main reference series, it was also necessary to look at other major activity variables like private consumption, industrial production and private corporate sales for determining the reference turning points, it said.
The panel set up in October 2001 said there was an urgent need to strengthen the information base on business cycle indicators, test various theories in the Indian context and determine the reference cycle peaks and troughs dating the expansionary and recessionary phases of the economy.
The methodology for forecasting fluctuations in agriculture output may be different from that for rest of the activities as indicators for industrial and services output were not appropriate for predicting movements in agricultural output, the group said, according to an RBI release here.
The group said improvements in the database of a number of variables relating to business cycle analysis such as urban housing, organised employment, manufacturing and retail inventories, capacity utilisation, consumer confidence were also necessary.
The present information base on fiscal and financial sector variables can be explored for their possible use as leading indicators, it added.
Research on business cycle in the Indian context has been scanty and confined to empirical aspects. For a better understanding of the phenomenon, it was necessary to promote research on theoretical aspects, including testing of competing paradigms on business cycle.
RBI had set up the working group to suggest suitable approaches for research on relevant economic indicators. Eminent economists Dilip Nachane, SL Shetty, MJ Manohar Rao, Saumitra Chaudhari and Ila Patnaik were members. RB Barman, RBI executive director was the convenor of the group.