The document discusses various leading economic indicators of the Indian economy such as GDP growth trends, inflation rates, interest rates, credit levels, exports, imports, foreign investment, stock market performance, monsoon rainfall, and development indicators. Leading indicators can provide useful insights into the future direction of the economy by signaling turning points in business cycles ahead of changes in broader economic conditions. Monitoring a basket of leading indicators allows for more accurate forecasting of the overall performance of the Indian economy.

1. Leading Indicators
of the Indian Economy

2. Introduction
 History of the Indian Economy
 The Liberalization Process: The 80s and
the 90s
 Beneficial Effects of the Reform Process
 We are the Fourth Largest Growing Economy in
terms of PPP with a GDP of US $3.36 trillion
 In Exchange terms, we are the Tenth Largest in
the world with a GDP of US $ 691.87 billion
(2004)
 Second Fastest Growing Major Economy of the

3. Introduction
 The increasing importance of the Indian
Economy has led to a need to Forecast
the Performance of the of the Indian
Economy
 Monitoring of the Indian Economic Cycle
has become an increasingly attractive
option for this
 Dua et. al. initially propounded an index
based on concurrent indicators but using
an index based on leading indicators is

4. The Indicator Approach
 The Indicator Approach exploits the fact
that different time-series do have different
cyclical periods
 Time-series can be classified into
Coincident, Leading and Lagging
Indicators
 Coincident: Measures of Output, Income,
Employment and Sales
 Leading: Placement of New Orders,
Intention to Build and Changes in
Profitability

5. The Ideal Indicator
 It would cover half a century or longer,
thus showing its relation to the economic
cycles over a variety of conditions
 It would lead the month, around which
cyclical revival centers, by an invariable
interval of say, three months or even
better, six months. It would also lead the
central month of every cyclical recession
by an invariable time interval, which
might differ from the lead at revival.

6. The Ideal Indicator
 It would show no erratic movements, that
is, it would sweep smoothly up from each
cyclical trough to cyclical peak and then
sweep smoothly down to the next trough,
so that every change in its direction
would herald the coming or recession in
the general economy or business.
 The cyclical movements would be
pronounced enough to be readily
recognized, and give some indication of
the coming change

7. Illustration of a Leading
Indicator

8. List of Leading Indicators
 Trends in Gross Domestic Product (GDP): Contribution of Agriculture, Industry and
Services
 Purchasing Power Parity (PPP) Index
 Fiscal Deficit
 Trends in Inflation Rate
 Interest Rates
 Credit Off-take
 Balance of Payment
 Foreign Exchange Reserves
 Crude Oil Rates
 Foreign Direct Investment (FDI) Trends
 Rain fall Index
 Sensex
 Exchange Rate
 Savings/GDP Ratio
 Human Development Index
 Electric Power Generation

9. Gross Domestic Product
GDP = consumption + investment +
government
spending + (exports − imports)
 Consumption, Investment: Final
Expenditure on Goods and Services
 Export-Import: Balance of Trade
 Consumption: Private and Public
 Significance of GDP

10. GDP: Indian Scenario

11. GDP: Indian Scenario

12. GDP: Indian Scenario
 The GDP growth trend for the last three
years appears to indicate the beginning of
a new phase of cyclical upswing in the
economy from 2003-04
 The initial momentum to this new phase
of expansion, in 2003-04, was provided
by agriculture
 Industry and services have acted as the
twin engines propelling overall growth of
the economy

13. Grenville Savio Noronha

14. Human Development Index
 HDI is a measure of poverty, literacy,
education, life expectancy, childbirth, and
other factors.
 It is a standard means of measuring well
being, especially child welfare.
 HDI stresses the importance of the quality
of life.

15. Human Development Index
The three basic dimensions of HDI :
1) Life expectancy at birth
2) Knowledge (as measured from adult
literacy rate)
3) Standard of living

16. Human Development Index
EMPLOYMENT:
 India’s labour force has reached 375
million approximately in 2002, and it will
continue to expand over the next two
decades.
 The actual rate of that expansion will
depend on several factors including
population growth, growth of the working
age population, labour force participation
rates, educational enrolment at higher
levels and school drop-out rates.

17. Human Development Index
EDUCATION :
 Literacy rates in India have arisen
dramatically from 18% in 1951 to 65% in
2001, but these rates are still far from the
UMI reference level of 95%.
 Literacy among males is nearly 50% higher
than females, and it is about 50% higher in
urban areas as compared to the rural
areas.
 Literacy rates range from as high as 96%
in some districts of Kerala to below 30% in

18. Human Development Index
 In terms of total investment in R&D, India’s
expenditure is 1/60th of that of Korea,
1/250th of that of the USA, and 1/340th of
that of Japan.
 More significantly, atomic energy, space
and defense research account for 71% of
all central spending on science and
technology, which means that relatively
little is left for investment in agriculture,
energy, telecommunications and other
crucial sectors within the sphere of science

19. Human Development Index
 R&D expenditure even in India’s fast-
growing IT sector has been averaging
around 3% of sales turnover (STO), which
is much lower as compared to the 14-19%
expended by internationally reputed
software firms.
 These low figures reflect on our R&D
performance. India’s share of global
scientific output in 1998 was only 1.58 per
cent of the world’s total.
 Out of 500,000 new patent applications

20. Human Development Index
HEALTH :
 Like population growth and economic growth, the health
of a nation is a product of many factors and forces that
combine and interact with each other.
 Economic growth, per capita income, employment, levels
of literacy and education—especially among females—
age of marriage, birth rates, availability of information
regarding health care and nutrition, access to safe
drinking water, public and private health care
infrastructure, access to preventive health care and
medical care, health insurance, public hygiene, road
safety, and environmental pollution are among the
factors that contribute directly to the health of the
nation.

21. Human Development Index

22. Human Development Index

23. Gnanasundaram C

24. MONSOON AND ITS IMPACT ON AGRICULTURE
 58% of country's population depends on
agriculture
 27% of India ’s GDP comes from its
agricultural production.
 13-18% of India ’s total annual exports are
agricultural products.

25. MONSOON AND ITS IMPACT ON AGRICULTURE
 IMD predicts the onset date and rainfall
potential of the monsoon
 Output growth severely affected by
rainfall, especially in earlier years when
share of agriculture was 40 – 50 %
 data crucial for proper estimates of
production function, tfpg etc.

26. MONSOON AND ITS IMPACT ON AGRICULTURE
Construction of Rainfall Index
 For each year, only rainfall for four
months, June through
September, are considered.
 Area of each state =As
 (Mean) Rainfall for each rainfall station,
1871-2003: μs
 Standard deviation for each rainfall

29. FDI in India
 FDI is investment made by a foreign
individual or company in productive
capacity of another country. It is the
movement of capital across national
frontiers in a manner that grants the
investor control over the acquired asset.
 India is considered a stable country for
investing in by corporate overseas.
 India has displaced US as the second-
most favored destination for (FDI) in the

30. FDI in India
FDI has an impact on
2. Country's trade balance
3. Increasing labour standards and skills
4. Transfer of new technology and innovative ideas
5. Improving infrastructure, skills and the general
business climate.
US INVESTMENT IN INDIA
 U.S. is one of the largest foreign direct investors in
India.
 The stock of actual FDI Inflow increased from U.S.
$11.3 million in 1991 to US $4132.8 million as on
August 2004 recording an increase at a compound rate

31. Top sectors attracting FDI from USA are
 Fuels (Power & Oil Ref.) (35.93%)
 Telecommunications (radio paging,
cellular mobile & basic telephone
services) (10.56%)
 Electrical Equipment (including Computer
Software & Electronics) (9.50%)
 Food Processing Industries (Food

32.  India's English-speaking population is highly valued by
American, Canadian and British investors.
 India received investments from GE Capital, American
Express, Citibank, Conseco, British Airways, Dell
Computers and Reuters.
 This FDI resulted in the development of call centres,
back office support and facilities to handle knowledge-
intensive activities.
 From software giant Microsoft to telecom biggies Nokia
and Samsung to auto majors Honda and Toyota, global
players now eye India as the most attractive destination

34. Lt Col D G Naik

35. SENSEX
 Definition
 Significance
 Calculation Methodology
 Selection
 Free Float Market Capitalization (from September
1, 2003 )
 Calculation, closure
 Maintenance

36. Definition
 Sensitivity Index
 Base Year 1978 – 79, Base = 100
 Basket of 30 constituent stocks
representing a sample of large, liquid and
representative companies from diverse
sectors.

37. Significance
 Barometer of Business climate.
 Facilitates capital formation.
 Domestic Market/ Institutions.
 FIIs.
 FDIs.
 Likely to lead to boom in other asset
classes as the profits get ploughed.

38. Calculation Methodology
and Maintenance
for SENSEX

39. Journey Of SENSEX

41. CONCLUSION
 Leading Indicators relative to the
objective.
 Choice.
 Standardization.
 Construction of Ideal Leading Indicators –
not easy.
 Forecast based on Leading Indicators – a
useful planning tool.