Business cycle of south and west India more synchronised with country: RBI study

The RBI paper also found that agricultural states had more synchronisation compared to industrial and services sector dominated states.

The business cycle of southern and western regions is now more synchronous with the rest of the country, according to a new study published in the RBI monthly bulletin of September.

The paper published on September 20 found that synchronisation between regional and national cycles has increased owing to common events affecting both like weather shocks and and changes to global crude oil and commodity prices.

It further pointed to fiscal and monetary policy leading to state synchronisation. The Federal Reserve, on September 19, slashed the policy rate by 50 bps.

Economists note that RBI is unlikely to follow suit in October but may go for a 25bps rate hike in December.

The paper also found that agricultural states had more synchronisation compared to industrial and services sector dominated states.

“Geographical proximity appears to plays an important role for interlinkages with industrial and services states,” it further noted.

Maharashtra had more synchronisation with industrial oriented states of the south, while farming states of Andhra Pradesh, Rajasthan, Madhya Pradesh and UP were strongly correlated.

The paper also asks for strengthening of RBI accounts for better study of state business cycles to mitigate the impact of adverse effects.

The ministry of statistics and programme implementation has also been stressing on the need for district wise statistics