Understanding fluctuation a demand and supply side perspectives
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Understanding Fluctuation: A Demand and Supply Side Perspectives. Nilanjan Banik, PhD Associate Professor Center for Advanced Financial Studies Institute for Financial Management and Research. Full Employment Level of Output Versus Actual Output. GDP. Full Employment Level of Output.

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Understanding fluctuation a demand and supply side perspectives

Understanding Fluctuation: A Demand and Supply Side Perspectives

Nilanjan Banik, PhD

Associate Professor

Center for Advanced Financial Studies

Institute for Financial Management and Research


Full employment level of output versus actual output
Full Employment Level of Output Versus Actual Output Perspectives

GDP

Full Employment

Level of Output

Peak

Peak

Actual Level of Output

Recession

Time


Growth versus development
Growth Versus Development Perspectives

  • Growth is a uni-variate concept and measured as growth rate of per capita real GDP.

  • Development is a multivariate concept; essentially taking into account per capita GDP; mortality rate and literacy rate.


Gdp per capita going by ppp us
GDP per capita, going by PPP (US $) Perspectives

Source: WDI Online Database


Development indicators
Development Indicators Perspectives

Source: Economic Survey 2006-2007; National Institute of Rural Development.

' At 1993-1994 prices; !In 1999-2000 base year prices; * Figures for the year 1999-2000.


Sectoral Shares of GDP Perspectives

Source: Reserve Bank of India and CSO

! Percentage growth during that particular fiscal


Capital formation and employment share
Capital Formation and Employment Share Perspectives

Source: Reserve Bank of India (2006); CSO (2006); NSSO (2006).


Growth and volatility
Growth and Volatility Perspectives

Source: National Account Statistics


Factor productivity
Factor productivity Perspectives

Source: Bosworth, Collins and Virmani (2006).

During 1993-99, output per worker in the services sector grew at a rate of 7 percent

Output per worker in the manufacturing sector grew at a rate 4.5 percent

Output per worker in the agricultural sector grew at a rate of 2.4 percent


Profits and sensex
Profits and Sensex Perspectives

Source: Joshua Felman, International Monetary Fund


Some facts
Some Facts Perspectives

  • “Among wage and salary earners the top 20 per cent of the population in urban India earns 56 per cent of the income while the bottom 20 per cent earns barely 3.4 per cent of the income” – pp.42

  • “Indeed the top 20 per cent earns more than all other put together” – pp.43

Source: India Today, September 18-24, 2007; NSSO – 2004-2005.


Data and methodology
Data and Methodology Perspectives

  • Decompose agricultural, manufacturing and services, components of GDP into trend component and cyclical component.

  • It is a bi-variate model; with rainfall and individual GDP components - agriculture, manufacturing or services, all at the State level.

  • Trend component generally represents supply side whereas cyclical component generally represents demand side components.

  • Blanchard - Quah decomposition techniques is used for identifying demand and supply side shocks.


Results
Results Perspectives

  • Supply side disturbances contribute most to fluctuation in agricultural output and least to fluctuation in services sector output.

  • Demand side disturbances mostly affect manufacturing output. Services output again are least affected.

  • Fluctuations are measured at a lag length of four quarters.


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