New Delhi: The director (research) at the Indian arm of Economist Intelligence Unit (EIU), Manoj Vohra, has not jumped on to the economic recovery bandwagon. He remains cautiously optimistic and has not seen the need to make any marked revisions to his forecasts in the wake of recent positive indicators. On the eve of EIU’s India Forecasting Forum meet, where policymakers and industry exchange analyses and forecasts, Vohra spoke about forecasting and EIU’s take on the economy. Edited excerpts:
How has forecasting been in the last year?
Lower forecast: EIU’s Manoj Vohra says India will grow only 6.3% in 2010-11 because of the challenges it will face in accelerating growth. Rajkumar / Mint
It has been extremely challenging, nightmarish and exciting. All at the same time. You have huge amount of unpredictability in the market... There have been rapid upgrades, revisions to our forecasts whenever we have seen that sustainability in the data. These are difficult times, but also times which perhaps would define a lot of new paradigms for policymakers, companies.
When you make the forecast, what is your primary objective? Do you try to get the precise number or do you try to catch the trend?
Both are important. You really need to have precise numbers. Secondly, the trend. Identifying an issue which you think can change things dramatically... When elections were held, internally, we had a view that the Congress (party) is going to come back to power. We really didn’t know they would come back to power with such a significant majority. That view led us to believe there is going to be a fair amount of stability in policymaking. So while many others were really cutting India’s forecasts, we stuck to our forecast. Those are qualitative factors which are difficult to capture by purely looking at numbers.
The third thing is consistency. We forecast 200 countries on a monthly basis. We need to make sure there is a consistency in our approach. Our forecasting setup is centralized. What we forecast at the global level feeds into our country forecasting units.
Seven or eight months ago, you had forecast that inflation would be a big challenge this year at a time when people were talking about the threat of deflation. What made you make that forecast?
There were two reasons. One was purely the base effect. Second, in India, inflation is a structural problem. If you look at the components of inflation which have long been not revised, you don’t really get a true picture of what the numbers tell you. So, you do have to look at the underlying categories and how they are likely to behave. I had said that it is a risk. No one can predict the monsoon in India. This time we had acute shortfall. Even if it is a scanty monsoon, you are going to have problems on the commodities side. That was risk and it is actually going to become a major challenge. Now, RBI (Reserve Bank of India) has to decide whether it should choose inflation or growth.