Graphic: Ajay Negi/Mint
Graphic: Ajay Negi/Mint

OECD leading indicator says growth gaining momentum in India

Growth has started to revive from June 2017 and gained further

The Organisation for Economic Co-operation and Development’s (OECD’s) Composite Leading Indicators (CLIs) are designed to anticipate turning points in economic activity relative to trend, six-nine months ahead. CLI for India for the month of July (the latest month for which CLIs are available) shows that economic growth is gaining momentum.

The chart shows that CLI for July, although up from the preceding month, is still below where it was a year ago. A reading of 100 represents the trend line of economic activity. As we can see from the chart, growth is still below trend. The chart also shows that CLI started slipping below the trend line in June 2016 and fell to a low in January 2017. However, growth has started to revive from June 2017 and gained further momentum in July. Recall that the gross domestic product data also showed a slowing of growth from the June 2016 quarter, which is in sync with the CLI numbers. Hopefully, this time the rising CLI will be a pointer to higher growth in the current quarter.

CLI for China, as shown in the chart, indicates strong momentum for the Chinese economy as well, which recovered its trend growth rate in July 2017.