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Nowcasting economic activity in India using payment systems data
Journal of Payments Strategy & Systems,
13
(1),
72-81
(2019)
Abstract
In many economies, the publication of gross domestic product (GDP) figures tends to lag actual economic performance. In India, for example, the time lag is currently almost three months. This paper assesses whether real-time gross settlement (RTGS) data can be used to ‘nowcast’ Indian GDP. As RTGS data are available to the Reserve Bank of India (RBI) on an almost daily basis, such data can be used to construct timely GDP forecasts. This paper reports some initial results on using payments systems data to enhance GDP forecasts. The paper shows that GDP and RTGS are co-integrated, and using an ARIMA-type model demonstrates that RTGS volume data have considerable predictive ability for real GDP.
Keywords: forecasting; nowcasting; GDP; real-time gross settlement (RTGS); payment systems in India
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Author's Biography
Sudhakar Raju is Professor of Finance at Rockhurst University in Kansas City, Missouri. He is a graduate of Harvard University and has served as a consultant to organisations like the Chicago Board of Trade and the World Bank.
Mahadevan Balakrishnan is currently with the Payment System Development Group, World Bank, helping multiple developing nations improve their financial market infrastructure. Prior to that he was Chief Operating Officer of the National Payments Corporation of India (NPCI), responsible for Business, Operations and Technology. In that role he was involved in the creation of multiple retail payment infrastructures for the country, covering NFS ATM Network, the Immediate Payment System (IMPS), ACH, cheque truncation systems, the automation of 1000+ clearing houses in India with a standard solution, AADHAAR-based payment ecosystems for direct benefit transfer schemes, and the RUPAY domestic cards scheme, thus helping NPCI deliver its vision of simple, easy, convenient and cost-effective retail payment systems for all Indians. The systems he helped create in India facilitated the PMJDY financial inclusion schemes and the Direct Benefits Transfer to Bank Accounts schemes, saving India billions of Rupees. He has over 25 years of banking/technology leadership/ management experience with leading banks such as ABN AMRO Bank, Barclays and Citibank, and he was also involved in the implementation of some of the payment systems for these banks. He is a postgraduate in Business Administration (MBA) and in Bank Management (MBM), and has a Doctorate (PhD) in Financial Management/Payments. He has published several papers relating to payment systems in national and international journals.
