Restaurant searches, rail traffic: New data sets to gauge Indian economy

There are other metrics too, such as e-way bills, mobility measures and power generation, all of which are used to support the national accounts figures, not replace them

Li Keqiang, then Chinese Communist Party Committee secretary of Liaoning, had told a US ambassador in 2007 that the GDP figures in Liaoning were unreliable and that he himself used three other indicators: the railway cargo volume, electricity consumption and loans disbursed by banks to gauge real performance of the economy, according to a State Department memo released by WikiLeaks.

Li is now the country's premier. Later The Economist created the Li Keqiang index or Keqiang index using these three indicators as better economic indicators of the Chinese economy than official numbers of GDP.

However, just three parameters are not enough to gauge an economy like India where dynamics are changing quite fast these days.

There are a number of measurements, often referred to as lead indicators or high-frequency indicators in India which are, however, used not as an alternative to the official national accounts figures, but to gauge economic performance in India much ahead of quarterly GDP data.

However, the traditional measurements often come once in a month. Nowadays, the scope of monthly data has widened to include not just the index of industrial production (IIP), inflation, purchasing manager indices (PMIs), but also actual coal production, auto sales, eway Bills, tax collections, particularly GST which give assessment of the economy in advance of the IIP release.

In fact, some indicators are nowadays used much more frequently by analysts.

For instance, QuantEco Research, founded by former Yes Bank chief economist Shubhada Rao and her team, uses its Dart Index weekly to gauge the economic activities in India. The index is composed of e-way bills, rail passenger traffic, rail freight, online restaurant searches, electricity generation and select mobility indicators.

Yuvika Singhal, economist at QuantEco Research, said both Google mobility and Apple driving mobility are used for mobility indicators.

She clarified that the DART index is a complementary indicator and not a substitute to GDP as it looks at a subset of indicators.  

"What is more important is GDP comes with a considerable lag. Once a quarter ends, we get GDP data after two months," Singhal said to underscore the importance of the DART index.

She said GDP data gives granularity, but a lot of times it does not tell the turning points in the economy on a real time  basis.

"That is where in a Covid kind of scenario we were struggling to gauge that. That was a genesis to create a real time indicator where we are tracking ultra high frequency indicators on a weekly basis," Singhal said.

ICRA chief economist Aditi Nayar, who looks at 15 high frequency indicators such as scooter sales, vehicle registrations, production by Coal India Limited, electricity generation, non-oil exports, rail freight, rail freight, bank deposits, non-food credit, to gauge the economy in advance of the IIP and GDP figures on the monthly basis, however, said there is a lot of inherent noise and volatility in the weekly data, which gets smoothened out in the monthly data.

For instance, she said the daily average generation of gst e-way bills tends to be the lowest at the beginning of the month and then ramps up as the month progresses.

"While we observe how the weekly trends are progressing and use them to form an opinion of how the entire month will pan out, we do not base our forecasts on sequential weekly trends. We use the monthly indicators to form our forecasts of the IIP and non agri GDP," she said.

Singhal agreed that one has to keep in mind that the weekly data have  little bit of noise. For instance in a Diwali week, mobility declines as people are not traveling and it is a holiday time, she said.

"There could be certain gyrations in weekly data but it is important that if we smooth out weekly data on a monthly basis, we get a good pulse to what has been  happening in the economy on a weekly and monthly basis. That is what we are getting ever since we created the DART index. And that is in sync with GDP data too," she said.

So, what does GDP data for the third quarter of the current financial year look like on the basis of the DART index?

Responding to this, Singhal said the broad story that is emerging for the third quarter is that concerns over Omicron and supply disruptions are stronger globally, but the Indian economy has shown a fair degree of resilience and the sequential improvement in growth that was seen in Q2 has continued in the third quarter.

"From a growth perspective, we have done fairly well in Q3. To collaborate, our DART index for the week ended  December 26 was at the record post-pandemic high," she said.

When the index was created in March 2020, which was the onset of Covid in India, QuantEco benchmarked the index to 100, and for the week ended December 26, 2021 it was at 117.

Around February, 2021 before the second wave had begun, there was then a peak of around 104 recorded by the DART index.

"We have crossed that too and are way above that. The growth recovery has happened at a fairly quick pace. Momentum that we saw in Q2 continued in Q3. The global concerns over Omicron, high inflation has so far not hit the Indian economy in a very strong way," Singhal said.

However, she cautioned that one has to wait to see how Q4 plays out, because Omicron cases are now rising, forcing some states and cities to announce restrictions.

"If  these continued beyond the new  year,  then we could have a very different story depending on how caseloads come. Q4 is still unfolding. For now, Q3 has done fairly well," she said.

The latest report on monthly indicators by Icra shows that the growth momentum lost steam in November 2021, with some satiation of pent-up  demand after the festive season, and supply chain disruptions in parts of South India on account of untimely rainfall. As many as 12 of the 15 lead indicators recorded a deterioration in their year-on-year (YoY) performance in that month, relative to October 2021. Moreover, the number of indicators surpassing their pre-Covid levels eased to seven in November 2021 from nine in October 2021.

The report also said that the early data for December 2021 is mildly positive, and second shot coverage appears set to rise to 61 per cent of Indian adults by the end of the month. However, it remains to be seen whether the existing Covid-19 vaccines will offer protection against the Omicron variant and avert a third wave in India. Amid the heightened uncertainty generated by Omicron, convincing signs of a durable and sustainable recovery are yet to emerge, the report on monthly indicators said.

With this, Icra pegged economic growth in India at nine per cent in FY22, with a clear K-shaped divergence amongst the formal and informal parts of the economy, and the large gaining at the cost of the small.

"Looking ahead, we expect the economy to maintain a similar 9 per cent growth in FY23. However, the expansion in FY23 is expected to be more meaningful and tangible than the base effect-led rise in FY22," Icra said.

Nomura also comes out with its Nomura India Business Resumption Index (NIBRI) on a weekly basis. It comprises Google mobility indices, driving mobility from Apple, power demand and the labour force participation rate. An email query to the company elicited no response.

While, lead indicators are mainly used by analysts to gauge the economy not as a substitute for the GDP but to forecast it, former chief economic advisor Arvind Subramanian along with Josh Felman, former International Monetary Fund (IMF) resident representative in India who now runs an economic consulting firm, JH Consulting, tried to use some of the indicators to come out with their own GDP numbers as an alternative to the official figures.

Their study, titled Peering Back to Look Forward: Measurement to Prognosis, showed that GDP had contracted during 2019-20, a pre-pandemic year, unlike the official version that showed GDP growth merely decelerated to 4 per cent during that fiscal year. GDP grew 6.1 per cent in 2018-19 and 7.2 per cent in 2017-18, according to the data released by the Ministry of Statistics and Programme Implementation (MoSPI).