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SABNAVIS ECODEX: August 2016 (for June 2016)

Today we all talk of the state of the economy based on a single indicator that appears in the media.
Hence, when the IIP numbers are out, and show a negative tendency, we say that the economy is not
doing well. High inflation numbers that come out on the 12th or 14th of the month are looked at with
apprehension while movements in exchange rates bring out mixed emotions. The question is whether or
not we can capture all these aspects in a single number. The ECONDEX captures the same for India at
any point of time. The index in January would take into account the latest data that is available on 13
economic indicators.

Watch the dark bold line in red for this year


What does this show?
1. The overall state of the economy is lower this year than both 2013-14 and 2014-15.
2. The trend is upwards moving which is positive.
3. With pick up in economy expected after August, the ECONDEX should improve. It should be
pointed out that the index has shown an increasing trend during the first part of the year and
then tapers downwards in the last quarter. This year, the low base effect should help to
maintain an upward trajectory to a large extent.

18

SABNAVIS ECONDEX

16
14
12
10
8
6
4
2

2012-13

2013-14

2014-15

4. The Factors affecting the ECONDEX negatively are:


a. Inflation
b. Primary issuances

2015-16

2016-17

c. FPI flows

5. External sector continues to be stable.

Explanatory note
The SABNAVIS ECONDEX
The SABNAVIS ECONDEX (Economic Index) looks at 13 economic indicators that capture various aspects
of the economy such as:
1. Deposits: savings taking place
2. Credit: state of investment/production
3. IIP growth: state of industry
4. GSec yields: interest rate scenario
5. WPI: Production based inflation
6. CPI: Consumer price inflation and loss of purchasing power
7. Primary issues in capital market: investment climate
8. Secondary market movement: Optimism in market
9. FII inflows: Foreign interest in Indian markets
10. Exports: Export buoyancy
11. Imports: Reflective of internal growth
12. Forex reserves: External stability
13. Forex rate: Volatility in the market.

The aggregate score ranges between 0 and 20. Each indicator is looked at in multiple ways: changes year
on year or cumulative changes or changes over previous month of March depending on the variable.
The sum of all these scores is the Score for the month. These 13 variables have different weights based
on how important there are and the inter-relationship between them, to minimize double counting.

How often does ECONDEX change?


1. It changes every time information is received on any indicator.
2. The most contemporary number will be used for all other indicators.
3. However, once all the numbers are in for a month, then that number becomes the final score for
the month.

What does The ECONDEX show?


1. It shows how much better or worse we are compared to previous years as well as previous
months of the same year.
2. In case there are seasonal patterns, they get captured adequately here.

What does it not indicate?

1. The ECONDEX is not forward looking and does not purport to make any forecast of the future.
2. It is not an econometric model and hence does not make any connections between variables. In
fact all 13 variables are treated as mutually exclusive which may not be the case theoretically.
3. It does not capture variables on which high frequency data is not available like agriculture. But
indirectly it does take the performance of this sector through the inflation indices.
4.

It does not include variables whose movements are theoretically debatable: whether fiscal
deficit is good or growth in money supply, inflationary. However, their negative impacts come
out through movements in inflation numbers or interest rates.

How is it unique?
Presently there are surveys that talk of state of the economy. There are forecasts about the economic
variables during the year. A security house makes forecasts based on some leading economic indicators.
This is an attempt to capture the mood in the economy by a single number.

As this Score will change every time any of the 13 variables change, it will be quite unique as it reports
on a near real time basis the confidence levels on the economy.

TRACK the economic confidence in the country.