India is one of the emerging markets in the world who has emerged as the fastest growing major economy and soon to become one of the top 3 economic powers of the world in a decade or two. India is one of the countries which strongly backed by its democracy and has a lot of potentials to become one of the most developed nations. Indian government pays close attention to the key economic indicators to get information on the contraction and expansion of the economy and to predict future changes in the economy.
These key economic indicators provide the most current information on major economic events, financial news, and announcements which can influence the economy. In fact, many investors and forex traders use the economic calendar to keep tabs on the major economic events by following the key indicators. The reason why investors and stock traders follow economic indicators is to develop their own understanding of the economy and the key factors shaping it. So, by paying attention to the economic indicators they get the idea of where the economy is heading and plan their finances accordingly.
4 Key Economic Indicators India 2018
There are four key indicators – Gross Domestic Product (GDP), Interest Rate, Consumer Price Index (CPI), and Industrial Production etc.
The gross domestic product is one of the most important economic indicators to measure a country’s economic health. It is the measure of the total economic production of the country. It is the face of the economy. If the GDP value is increasing, it is a signal of a strong economy. But, it is not a perfect indicator. However, it is one of the lagging indicators which tell what has already happened not what is going to happen. Despite many businesses adjust their payroll, expenditures, and inventory based on GDP quarterly or annual results.
Especially in India where GDP is one of the most recognized economic indicators which uses by financial advisors, economists, research analysts, investors, and traders to check upon the recent economic developments.
India’s economy has increased around 6.6 percent approx in 2017-18 and is expected to grow 7.3 percent in 2018-19. Besides, some remarkable improvement has seen in the April-July quarter of 2018-19 in GDP which grew by 8.2 percent.
In India, the Interest rate decisions and monetary policies are handled by the Indian authority – Reserve Bank of India (RBI). It is considered a major economic event in India where the interest rates are decided by the RBI in the interest of businesses, consumers, investors, and country’s economy. It is also one of the lagging indicators which represent the money lent from one bank to another. In India, these monetary policies are determined by the Monetary Policy Committee (MPC).
For instance, when the monetary policy committee decides to increase the interest rates then the commercial banks or other lenders have to pay more interest to obtain money which they compensate by lending money to the borrowers at higher rates, which thereby make borrowers difficult to take out loans. As a result, the borrowers or consumers hesitate to take loans and the companies discouraged to expand their operations and businesses. As a result, the GDP growth affected. But, if the interest rates are too low, it is also not beneficial for the economy since there will be an increased demand for money and a rise in inflation. So, the interest rate is one of the crucial economic indicators which can suggest where the economy might be headed.
Before CPI, the wholesale price index (WPI) is one of the economic indicators used to measure inflation. India was using this economic indicator from a very long time but now India has adopted the consumer price index (CPI) to measure the inflation rate. It is one of the crucial economic indicators which used to measure inflation and deflation rate.
The best thing about this index is that it calculates the inflation from the consumer’s end. On top of that, it includes services which account for 60 percent of GDP approx., plus, it also includes both rural and urban part of the country. It measures the change in the prices of the total basket of goods and services such as transportation, medical care, and food over a period of time. This is why it is also known as the Cost of Living Index. Increasing inflation usually indicates a decrease in purchasing power which can lead to major problems in future. Hence, the average standard of living declines with the rise in inflation. Inflation also influences job growth, GDP, and employment rate.
Despite this CPI data or inflation has its own benefits like –
- It is the inflation which encourages consumers to spend and invest, which support the economy. Otherwise, the value of cash will be eroded.
- Due to high inflation, the interest rates are usually high, which encourages people to invest more and provide loans to small firms and entrepreneurs.
The investors who are invested in the manufacturing, mining, gas and utility sector use the economic calendar for collecting the reports on industrial production. In India, the data on industrial production comes on a monthly basis. The data includes the figures based on the raw volumes of goods produced by industrial factories, electric utilities, and mines.
Industrial production is one of the key economic indicators which measures the future inflation on the industrial level. Even the authorities keep an eye on the data of industrial production since its shows inflation at the industrial level. The only drawback is, it only measures the physical goods-producing industries and firms, not the construction production.
Final Thoughts: –
There are a lot of other economic indicators which tell a lot about a country’s economic health and future inflation or deflation in the country. Among these leading and lagging economic indicators, the gross domestic product (GDP), consumer price index (CPI), interest rate, and industrial production are key indicators in India which not only monitored by the economists or analysts but also by investors and traders who are invested in the stock market or other financial market.
For this reason, to accurately analyze the state of the economy, you must learn to do analysis based on various economic indicators. Just don’t forget some economic indicators work best in the corporation with other economic indicators. By the corporation, you can make better decisions regarding your investments and future goals.
Hope, you get the information you were looking for. Nevertheless, if you have any query or would like to add something then don’t forget to mention in the comment section below.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.