Closed For Business: In Times Of Heightened Uncertainty, RBI Has Discontinued Nowcasts

US President Donald Trump's recent announcement this week to charge India 25% tariffs and a penalty over and above has once again sent the Indian economy in a tailspin.

Economists are on a wait-and-watch mode on the impact the move is likely to have on economic growth and the current account deficit. Even before the announcement on tariffs, India's high-frequency indicators show that the economy remains on a slippery slope. Industrial output, for instance, grew at the slowest pace in 10 months in June, at 1.5%, led by a decline in mining though manufacturing saw an uptick.

In the mid of the cloud of uncertainty, the RBI has in recent months, discontinued the nowcast for the quarterly GDP growth. A nowcast — where recent high-frequency data was used to update the expected GDP growth — which otherwise comes with a lag, has been discontinued by the RBI.

The economic activity index, used for nowcasting, was constructed by extracting the common trend underlying 27 high frequency indicators. It was last published in the RBI's bulletin for the month of February this year. The discontinuation of the nowcast coincided with the end of deputy governor, Michael Patra's tenure, who retired in January this year.

To be sure, the RBI continues to publish quarterly projections in the Monetary Policy Committee statements. Time periods for latest nowcasts and forecasts differ. In February, when the RBI nowcast Q4 GDP growth at 6.6%, the RBI's projections in the MPC were for quarterly GDP growth in FY26.

The nowcast model of RBI had a very good track record with actual GDP outcome, according to Gaura Sengupta, chief economist at IDFC First Bank. Moreover, it was a one-point reading of how growth conditions are doing, she added.

However, Dhiraj Nim, economist at ANZ Research, said that a nowcast does leave room for error by nature, with these error bands being as wide a percent in times of economic volatility.