It has been a quarter of a century since India commenced the journey of opening its economy to the world. But the idea of a business cycle dating committee (BCDC) for India has not received sufficient attention. Most of the research in business cycles is done keeping in mind advanced industrial economies. The scarcity of research for studies of business cycles in India along with data limitations might be some of the reasons why policymakers in India are not too concerned about this issue. Business cycles are the short-run fluctuations in aggregate economic activity around its long-run growth path. A BCDC maintains a chronology comprising alternating dates of peaks and troughs in economic activity. Timely identification of economic contraction and its severity allows policymakers to intervene, and thereby reduce its amplitude and duration. In addition, firms can re-evaluate projections of sales and profits, and the consumers their purchasing and investment plans, based on information on transitions to new business cycle phases. Whether a BCDC should be part of the government, the RBI or an independent research organization with high credibility is debatable. Notably, the members of all the aforementioned BCDCs are independent scholars. As a result, the decision regarding the dating of business cycles is not political. BCDC will help India to be more in synchronization with the other developed and emerging market economies.

(Live Mint)