A new index has been launched by Goldman Sachs in India. Called the Goldman Sachs India Financial Conditions Index or GS India-FCI is aimed at understanding and forecasting the business cycle of India rather than only the interest rates. As per GS India-FCI a slide of hundred basis point in FCI brings down the industrial activity by around two percentage points. The components which are taken into consideration are money supply, interest rates, stock market and exchange rate. This index is expected to offer a comprehensive framework for understanding the economic environment as compared to the narrow measures based only on interest rates ir money supply. This would reveal the distinctive characteristics of the Indian economy. This tool is expected to help in judging the monetary policy depending upon the historical; relationships and monetary policy. It can be used for forecasting the variables for forming a view on the path of growth, policy and inflation.
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