Key Details
The IMF Working Paper, Measures of Macroeconomic Shocks and Uncertainty for Asia-Pacific Economies, creates comparable monthly indicators for GDP growth and consumer-price inflation across 14 economies. India is covered from December 1994 onwards.
Area | What the Paper Does |
|---|---|
Country coverage | India and 11 other Asia-Pacific economies, alongside the United States and Canada |
Data source | Monthly surveys of professional forecasters conducted by Consensus Economics |
Growth and inflation shocks | Measured through changes in the average GDP and inflation forecasts |
Macroeconomic uncertainty | Measured through the spread of forecasts across respondents |
India-specific treatment | Uses forecasts for India’s April–March financial year, unlike the calendar-year forecasts used for other economies |
Potential use | Monitoring shocks, improving forecasts and supporting monetary and fiscal contingency planning |
Forecast Revisions Provide an Earlier Signal
Official GDP and inflation data arrive with a delay and are frequently revised. The paper instead tracks how professional forecasts change from one month to the next, with survey results released shortly after collection.
A sudden downward revision to the average GDP forecast is treated as a growth shock. Greater divergence among forecasters is treated as increased macroeconomic uncertainty.
The data for a recurring problem is adjusted: uncertainty over the current year naturally declines as more months of actual information become available. Without this correction, comparisons across different months could mistake the shrinking forecast horizon for a genuine change in uncertainty.
India’s Largest Recent Uncertainty Spike Came with COVID-19
The new indicators generally correspond with major economic disruptions, including the Asian Financial Crisis, Global Financial Crisis, COVID-19 pandemic, Russia–Ukraine war and recent geopolitical conflicts.
For India, the paper’s charts indicate that:
GDP uncertainty rose sharply during COVID-19, far exceeding the increase in inflation uncertainty;
Forecasters made a large downward revision to India’s growth outlook at the pandemic’s onset;
The study identifies substantial negative demand and supply shocks during this period; and
Subsequent positive demand estimates may partly capture monetary and fiscal support, since the model does not separately identify policy shocks.
The last point is an important limitation. The estimated “demand” and “supply” shocks reflect how forecasters interpreted events in real time; they are not retrospective estimates from a complete structural model.
Policy Uncertainty and Macroeconomic Uncertainty Are Not the Same
The paper compares its survey-based measure with a widely used index that counts references to economic policy uncertainty in newspapers.
For India, the two measures have almost no linear relationship: the reported correlation is 0.01. This suggests that intense news coverage of policy uncertainty does not necessarily mean that professional forecasts for Indian growth and inflation have become substantially more dispersed.
The distinction is visible around the global trade disruptions beginning in April 2025. Newspaper-based uncertainty increased considerably across several economies, while the paper’s macroeconomic indicators generally recorded smaller and shorter-lived changes.
Both types of indicators can be useful, but they answer different questions:
A policy-uncertainty index captures the prominence of uncertainty in public and media discussion.
The paper’s measure captures disagreement over the likely path of economic growth and inflation.
Policy Relevance
For the RBI, separating growth and inflation uncertainty can help distinguish a weakening demand outlook from a supply disruption that raises prices while lowering output. The appropriate monetary-policy response may differ materially between the two.
The Ministry of Finance could use such indicators alongside official statistics and high-frequency data when preparing revenue assumptions, expenditure contingencies and macroeconomic scenarios.
A further benefit is cross-country comparability. Changes in the outlook for China, the United States and other Asian economies can affect India through trade, commodity prices, financial markets and investment.
The indicators should nevertheless remain complementary tools. They represent the views of a panel of professional forecasters, with between nine and 23 responses in India’s monthly series, and therefore do not capture every source of risk or uncertainty.
Follow the Full Working Paper Here: Measures of Macroeconomic Shocks and Uncertainty for Asia-Pacific Economies