Gross capital formation accounts for over 32% of India’s GDP, making it one of the key components of the Indian economy. In line with Orbis Economics’s practice of developing alternative quantitative measures to get a better understanding of the Indian economy, the beta version of the India Investment Index (Triple I) has been constructed, which is a single point indicator for a monthly perspective on the latest trends in capital formation. It is a weighted average of a host of economic indicators with strong explanatory power for GCF, available on both a non-seasonally adjusted as well as seasonally adjusted basis.
For regular readers of the India Macro Weekly, which covers our other two proprietary indices – the Exchange Rate Index and the Consumer Conditions Measure – the India Investment Index is constructed along the same principles. A value above 100 indicates that investment activity is on the upturn compared to that during the last one year and a value less than 100 indicates that investment activity has declined compared to the last one year. A value of 100 indicates that investment activity is static.
The latest numbers for the Triple I, for April 2017, show a divergence between the trends for the non-seasonally adjusted (nsa) and seasonally adjusted (sa) series. While Triple I, nsa, is at 96.3, a sharp decline compared to the 112.5 level during March 2017, the seasonally adjusted Triple I allows less room for disappointment as it has increased to 104.2 from 99.1 during the previous month. This indicates, that the decline is on account of seasonal factors than underlying weakness. The former series, though, remains significant since the quarterly GCF print is on an nsa basis.
India investment index
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