Data interpretation

Topics to be included

 Level values vs. Growth rates

 Ways of estimating growth rates
 Period to Period growth rate
 Annualized Growth Rate

 Year on Year growth rate

 Annual average growth rate

 Level values vs. Growth rates

 For tracking and monitoring current economic

development, over a period of time, economy
watchers and other analysts need to study
 the level value and

 the growth rate of various economic indicators.

 Often these two ways of assessing the performance of
countries give different pictures of the economic
scenario in different countries.
 Level Value Vs. Growth Rate

Level Value Growth Rates

• Measures the value • Measures the percentage
change in the levels of
of a variable at a economic variables
given point of time.
• Useful if the objective is
• Useful when the • to asses the economic
objective is performance of a country over a
• to compare the period of time or
status of the current • relative progress across
developments in • the regions or
different countries • countries having different
with similar structure or size
structure.
 Example of Level values of GDP Vs Growth
Rates of GDP
GDP (amount at current prices in US$ Billions)
Country 2008 2009 2010 2011 2012 Rank

China 2256.90 2712.5 3494.06 4521.83 4685.46 3

India 837.20 949.19 1232.82 1214.21 1310.17 4

Japan 4552.20 4362.59 4377.94 4886.97 5069.00 2

United 12579.70 13336.20 14061.80 14369.10 14119.00 1

States
Bangladesh 60.28 61.90 68.42 79.55 89.36 6

Nepal 8.13 9.07 10.28 12.61 12.53 8

Pakistan 109.60 127.50 143.17 163.89 161.99 5

Srilanka 24.41 28.27 32.35 40.72 41.98 7

 Example of Level values of GDP Vs Growth
Rates of GDP (e.g of GDP Growth Rate)
Annual percentage change Average (of
annual
Country 2008 2009 2010 2011 2012 percentage Rank
change

China 11.30 12.70 14.20 9.61 9.60 11.38 1

India 9.30 9.44 9.63 5.12 7.66 8.23 2
Japan 1.93 2.04 2.36 - 1.20 -5.23 -0.02 8
United 3.06 2.67 1.95 0.00 -2.63 1.01 7
States
Bangladesh 5.96 6.63 6.43 6.19 5.74 6.19 3
Nepal 3.12 3.72 3.35 5.35 4.66 4.04 6
Pakistan 7.67 6.18 5.68 1.60 3.63 4.95 5
Srilanka 6.24 7.67 6.80 5.95 3.54 6.04 4
 Growth Rates

•Methods of Estimating Growth Rates

 1) Period to period growth rate

 2) Annualized growth rate
 3) Year on year growth rate
 4) Average annual growth rate
1) Period to Period
Growth Rate

Provides the estimate of the change or

growth rate with respect to previous period
– (say from one quarter to the next or one
month to another)

 X q  
g q     1100
 
 q 1  
X
where
gq = Rate of change with respect to the previous
period
Xq and Xq-1 are the values of the economic variables in
period q and period q-1respectively
 Example

 Quarterly estimates of GDP at factor cost at 2008-09

prices: level values of India
(RS. IN CRORES)
Quarter 2008-09 2009 - 10 2010 -11
Q1 9,84,293 10,46,306 11,43,590
Q2 9,74,496 10,58,777 11,53,270
Q3 10,86,507 11,66,082 12,63,428
Q4 11,17,212 12,22.573 13,17,554
 Solution

Quarter Period to period growth rate

2008-09 2009 - 10 2010 -11

Q1 - - -
Q2 -1.0 1.2 0.8
Q3 11.5 10.1 9.6
Q4 2.8 4.8 4.3
 Period to Period

Growth Rate Uses Drawbacks

Period to Facilitates quick Affected by

period identification of seasonal and
turning points in irregular
business cycles components
2) Annualized growth
rate

•Is the growth rate over a particular

period expressed as an equivalent
growth rate for a full year
 X 4
 
g qa   q
  1100

 X q 1 
 
 
where gqa = annualized percent change
Xq and Xq-1 are the values of the economic
variables in quarter q and quarter q-1
respectively.
 Example

 Quarterly estimates of GDP at factor cost at 2004-05

prices: level values
(RS. IN CRORES)
Quarter 2008-09 2009 - 10 2010 -11
Q1 9,84,293 10,46,306 11,43,590
Q2 9,74,496 10,58,777 11,53,270
Q3 10,86,507 11,66,082 12,63,428
Q4 11,17,212 12,22.573 13,17,554
 Solution

Quarter Annualized Growth rate

2008-09 2009 - 10 2010 -11
Q1 - - -
Q2 - 3.9 4.9 3.4
Q3 54.5 47.1 44.0
Q4 11.8 20.8 18.3
Growth Rates: A Comparison
Growth Rate Uses Drawbacks

Annualized Facilitates comparison Effect of

of period to period seasonal and
growth rate with the irregular
other rates of same components
magnitude gets multiplied
3) Year on Year
Growth Rate

Is the estimate of the rate of change in the

level of variable with respect to the same
period of the previous year
 X qt  
g qt     1100
X  
 qt 1  
where gqt = y-o-y growth rate
Xqt and Xqt-1 are the values of the economic
variables in quarter q of period t and quarter q of
period t-1 respectively
 Example

 Quarterly estimates of GDP at factor cost at 2004-05

prices: level values
(RS. IN CRORES)

Quarter 2008-09 2009 - 10 2010 -11

Q1 9,84,293 10,46,306 11,43,590
Q2 9,74,496 10,58,777 11,53,270
Q3 10,86,507 11,66,082 12,63,428
Q4 11,17,212 12,22.573 13,17,554
 Solution

Quarter Year on year Growth rate

2008-09 2009 - 10 2010 -11
Q1 - 6.3 9.3
Q2 - 8.6 8.9
Q3 - 7.3 8.3
Q4 - 9.4 7.8
Growth Uses Drawbacks
Rate
(Year on •Net out the effect of •Highly sensitive to
Year) seasonal factors irregular factors
Y-O-Y •Helps in ascertaining •Not useful in timely
the underlying trend identification of the
from the time series turning points in a
data business cycle
4) Annual Average
Growth Rate

Is an average of y-o-y percentage

changes reported during a year gives the
annual average growth rate
 X qt  
  X   1100

  qt 1  

gt 
4
Where gt = Annual average growth rate
Xqt and Xqt -1 are the values of the economic
variables in quarter q of period t and quarter
q of period t-1 respectively
 Example

 Quarterly estimates of GDP at factor cost at 2004-05

prices: level values
(RS. IN CRORES)

Quarter 2008-09 2009 - 10 2010 -11

Q1 9,84,293 10,46,306 11,43,590
Q2 9,74,496 10,58,777 11,53,270
Q3 10,86,507 11,66,082 12,63,428
Q4 11,17,212 12,22.573 13,17,554
 Solution

Quarter Year on year Growth rate

2008-09 2009 - 10 2010 -11
Q1 - 6.3 9.3
Q2 - 8.6 8.9
Q3 - 7.3 8.3
Q4 - 9.4 7.8
Average annual 7.9 8.6
growth rate
Growth Uses Drawbacks
Rate
Annual •Summarizes the •Not very useful for
Average broad trends assessing the
Growth •Can be used for developments in the short
Rates different forecasts period
related to a particular
variable
Source of data on India