ZyFin Research's Business Cycle Indicator a tad higher at 8.6 in September
ZyFin Research, a leading financial research and analytics company, today announced its Business Cycle Indicator (BCI) for the month of September 2015. The index, which is a lead indicator to the Index of Industrial Production (IIP) trend stood at 8.6 during September as compared to 7.9 during August. The index had scored 8.1 during same period previous year. The IIP is expected to rise marginally during November, the official data for which will be available in January, 2016.The marginal uptick in the index affirms a better placed real economy vis-vis market volatility. However, growth of the real economy is constrained by ambiguity in policy decisions and legislations, irrational tax structures and weak demand in domestic markets. Also, efforts to propagate private investments are restrained by underutilized capacity in the wake of sluggish demand prospects globally.
Giving his views on Business Cycle Indicator (BCI) for the month of September 2015, Debopam Chaudhuri, Chief Economist, ZyFin Research, said, The overall weakness in BCI since early FY 15-16 presents a case for the need to cut interest rates. Consumer and investment sentiment need a shot in the arm to ensure the economy continues to strengthen in the near term.
The ZyFin Business Cycle Indicator is a forward looking composite indicator of the Indian business cycle with a one month lead on the Index of Industrial Production (IIP). In current scenario, when world growth remains uncertain, lead indicators like the BCI can provide timely signals regarding the future course of local economies. The journey from the bottom of a business cycle to its peak has two parts, recovery and growth. In case of the BCI, a score between 5 till 12 is a reflection of a recovering cycle while growth cycle can be identified once the score breaches 12. Data analysts usually take a three month moving average of the BCI scores to comment on evolving trends.
The growth of the BCI was confined by dim growth in bank credit, slowing exports, weaker than expected monsoons and price instability. Although India demonstrates slow growth prospects in the near term; the economy is better placed in the medium term. A large consumption base backed by purchasing power, inherent natural resources and rich human resource augur well for the Indian economy. Also, slackening prices of coal, cement and steel shall back creation of infrastructure thereby generating growth.
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