1. INTRODUCTION

In general, many of the economic time series exhibit regular, intra-year seasonal movements around their trend path resulting from climatic conditions, production cycle characteristics, seasonal nature of economic activity, festivals, vacation, etc. Though the seasonal fluctuations occur regularly, their magnitudes vary from year to year. Often seasonal variations are large enough to mask the real characteristics of the data that are of interest to the analysts of current economic trends. From the policy perspective, information on seasonal factors of an economic variable is useful as it enables the policy maker to differentiate between the seasonal changes and from the long-run changes and thereby design appropriate policy responses. In the recent period, with the availability and usage of high frequency data, the analysis of seasonal factors has in fact become essential for policy design, especially of short duration of less than a year. In this backdrop, monthly seasonal factors for selected economic and financial time series of the Indian economy are being regularly published in the Reserve Bank of India Bulletin from 1980 onwards¹.

This article presents the monthly seasonal factors of 60 economic/financial time series classified into major
five groups, namely,

A. Monetary and Banking Indicators (21 series);
B. Wholesale Price Index (WPI) (16 series);
C. Consumer Price Index for Industrial workers (CPI-IW) (1 series);
D. Index of Industrial Production (IIP) (18 series); E. External Trade (4 series).

The present article covers monthly data from April 1994 to March 2006 (reference period) with respect to each series for estimation of seasonal factors. The seasonal factors for external trade variables are generated using data in US dollar terms. The data are taken from the RBI Monthly Bulletin. The definitions of the series

^* Prepared in the Forecasting Division of the Department of Statistical Analysis and Computer Services.
¹ The previous study in this series was published in the December 2005 issue of the Reserve Bank of India Bulletin.

are the same as those in the ‘Notes on Tables’ of the RBI Monthly Bulletin.

The seasonal factors have been estimated on the basis of X-12 ARIMA^# methodology developed by the US Bureau of Census. The monthly seasonal factors for the year 2005-06, the average monthly seasonal factors for the period 1994-95 to 2005-06 and the forecasts of monthly seasonal factors for 2006-07 are presented in Table 1. The peak and trough values of the seasonal factors along with their respective months of occurrence are also presented in this Table. In Table 2, dispersion of the seasonal factors during last 11 years, in terms of ranges (difference between the highest and the lowest) of seasonal factors for all the 60 variables, are presented. Monthly seasonal factors for the last 11 years for some of the important variables are presented in Table 3. The salient features of variations in seasonal factors of some selected series during the last eleven years in general, and 2005-06 in particular, are briefly discussed in the subsequent paragraphs.

3. SALIENT FEATURES

The seasonal factors of Broad Money, Narrow Money and Reserve Money during 2004-05 are presented in Table 1 and are depicted in Chart 1. All the three series have their peaks and troughs in the months of April and September, respectively.

The Currency in circulation, a component of Reserve Money, had wide seasonal variations, with peak and trough in the months of May and September, respectively, over the years.

During 2005-06, the seasonal factors of Bank Credit and Investment of Scheduled Commercial Banks (SCBs) had their peaks in the month of April, and the troughs of these two series occurred in the months of August and December, respectively (Table 1). The seasonal peak of Bank Credit occurred mostly in the month of March (in some years the peak month shifted to April), but the trough was consistently in the month of August (Table 3). In case of Investments, the seasonal peak occurred mostly in the month of August (in some years the peak month shifted to April). However, trough months have varied over February, March and December during the past ten years.

The range of seasonal factors of Reserve Money has been consistently higher than those of Broad Money and Narrow Money (Table 2). The seasonal variations in Broad Money have moved in a narrow range over the period with an average range of 2.2 and standard deviation 0.2. Lower seasonal variations in Broad Money can be attributed to its dominant component, namely, the Time Deposits, which, by virtue of having stable characteristics, have considerably lower seasonal fluctuations. Demand

# For methodological details, kindly refer to the technical note annexed with the article ‘Monthly Seasonal Factors of Selected Economic Time Series’, Reserve Bank of India Bulletin, December 1999, Vol. LIII. Number 12, pp 1329 to 1331.

Deposits have shown considerably greater seasonal fluctuations than that of Time Deposits during 2005-06 (Table 2). However, the marginal rise in seasonal fluctuations of Time deposits, observed from 2001-02 onwards, may continue this year as well.

Over the years, the intra-year variations in Bank Credit and Investments had narrowed down, except that, during 2004-05 and 2005-06, there were relatively larger variations in case of Investments (Chart 2).

Over the period from 1995-96, the nature of seasonal variations in WPI-All commodities has a declining trend except that, during 2004-05 and 2005-06, there were seasonal variations of relatively higher order. Generally, these prices have peaked in September and trough in March.

The main group of WPI, viz., ‘Manufactured Products’, had the seasonal peak and trough in the months of September and February, respectively, during 2005-06. The seasonal peaks of other two major groups, viz., ‘Primary Articles’, ‘Fuel, Power, Light and Lubricants’, had also occurred in the month of September, but the trough months were different from February (Table1).

CPI-Industrial Workers has its seasonal peak (at 100.9) in November and trough (of 99.2) in April during 2005-06 (Table 1). Over the reference period,

the seasonal peak of CPI-Industrial Workers has varied over October and November, while its seasonal trough varied over February, March and April (Table 3).

The range of seasonal factors of WPI-All Commodities has declined from 1.7 in 1995-96 to 1.2 in 2001-02. During the period from 2002-03 to 2005-06, it moved in the range of 1.3 and 1.6. Over the reference period, this series has been showing a seasonal variability within a narrow range (Table 2).

A comparison of range of seasonal factors of ‘Primary Articles’, ‘Fuel, Power, Light and Lubricants’ and ‘Manufactured Products’ reveals that, the seasonal variations are much more pronounced in the case of first two groups and are relatively low in the case of ‘Manufactured Products’ (Table 2 and Chart 4).

The seasonal fluctuations of WPI-Food Articles, which narrowed down till 2002-03, are showing an increasing trend in recent years. Among the Cereals group, the seasonal fluctuations of WPI-Rice have steadily decreased, over the reference period, but the fluctuations of WPI-Wheat are increasing from 2002-03 onwards (Table 2). The seasonal fluctuations of WPI-Pulses increased from 4.9 in 1995-96 to 6.8 in 2000-01 onwards, and then from 2001-02 onwards, it is steadily decreasing.

A comparison of seasonal factors among the individual commodities reveals that, fluctuations were

high in the case of WPI-Food Articles (i.e., ‘Fruits & Vegetables’, ‘Pulses’) than those of Food Products (i.e., Manufactured Products like Sugar) over the reference period. The range of seasonal factors of Food Articles consistently declined from 5.7 in 1995-96 to 4.4 in 2002-03 and then again picked up to 4.8 during the next three years. In the case of Food Products, the range declined from 2.1 in 1995-96 to 1.7 in 1998-99, which increased from 1.9 in 1999-00 to 2.2 in 2003-04. For the last two years, viz., 2004-05 and 2005-06, it reverted below 2.0 (Table 2).

The range of seasonal factors of CPI-Industrial workers has decreased steadily from 1997-98 onwards from 3.4 to 1.7 in 2005-06. Over the reference period, the seasonal variations in terms of difference of peak and trough values of CPI-Industrial Workers continued to be higher than that of WPI-All Commodities (Table 2 and Chart 5). However, during 2004-05 and 2005-06, the ranges of the two series show almost convergence.

IIP-General Index had its seasonal peak of 108.0 in March and trough of 95.8 in April (Table 1). This seasonal peak of IIP-General Index in March had remained same over the years; but the trough varied in the months of April, June and September.

A comparison of seasonal factors of IIP according to the industry groups, by use-based classification, reveals that, during 2005-06, the Basic Goods industries and

Capital Goods industries have their seasonal peaks in March and troughs in the months of September and April, respectively. In case of Intermediate Goods, seasonal peak and trough occurred in the months of December and February, respectively (Table 1). On an average, the seasonal peaks of Basic, Capital and Intermediate Goods Industries occurred in the month of March. The seasonal troughs of Basic and Capital Goods Industries, occurred, on an average, in the month of April, during the reference period, but that of Intermediate Goods Industries occurred in November.

The three major sectors of IIP, viz., Mining, Manufacturing, and Electricity exhibit their seasonal peak in the month of March, but their seasonal trough occurred in the months of September, April and February, respectively (Chart 6). Over the years, the seasonal peak of these three series has occurred in the same month of March. The seasonal trough of the Manufacturing sector occurred in the month of June, influencing the overall industrial sector to have the seasonal trough in the same month.

Among the sub-sectors of the Manufacturing sector, viz., ‘Metal Products & Parts (except machinery & equipments)’, ‘Machinery and Equipments (other than Transport Equipments)’, and ‘Transport Equipments and Parts’, during 2005-06, had a similar seasonal pattern, peak in March and trough in April. During the reference period, on an average, all the sub-groups, except ‘Food Products’ and ‘Basic Chemical and Chemical Products (except products of Petroleum and Coal)’, of Manufacturing sector, had common seasonal peak in March, but the trough

varied over different months. The Industries, related to Engineering and Infrastructure, viz., ‘Basic Metals and Alloy Industries’, ‘Machinery and Equipments (other than Transport Equipments)’, and ‘Transport Equipments and Parts’, had the common seasonal trough in the month of April.

The seasonal peak of Consumer Goods occurred in the month of January in 2005-06. The nature of seasonality of Consumer Goods could be attributable to the Consumer Non-Durable Goods (Table 1).

The range of seasonal factors of IIP-General Index has declined from 14.4 in 1995-96 to 12.0 in 2002-03 and remained almost the same in 2003-04 and 2004-05. The same pattern of seasonal fluctuations was observed in case of its major sector, namely Manufacturing Sector as well.

The production of Basic Goods and Intermediate Goods Industries exhibited less seasonal fluctuations than that of Capital Goods (Table 2 and Chart 7). From 2000-01 onwards, the seasonal fluctuations of Capital Goods production are steadily increasing, whereas, the Basic Goods and Intermediate Goods Industries have seasonal fluctuations within the narrow ranges during the reference period.

The range of seasonal factors of Mining has declined from 20.7 in 1995-96 to 17.7 in 2001-02. From 2002-03 onwards, its seasonal fluctuations are steadily increasing. In the case of Electricity, the range

of seasonal factors remained in a narrow range of 9.6 to10.2 from 1995-96 to 1998-99 and thereafter the range has increased from 10.6 in 1999-00 to 11.0 in 2001-02. From 2002-03 onwards, the decrease in range was noticed. Throughout the reference period the seasonal variations of IIP-Electricity was lower as compared to that of IIP-Mining and IIP-Manufacturing (Table 2). Among the sub-groups of the Manufacturing sector, ‘Food Products’ has shown much higher seasonal variations than the other sectors.

The range of seasonal factors of ‘IIP-Consumer Durable Goods’ showed decreasing trend from 1995-96 to 2003-04, as compared to ‘IIP- Consumer Non-Durable Goods’ (Table 2 and Chart 8).

Seasonal factors in respect of external trade series including Exports, Imports, Oil Imports and Non-oil Imports exhibited a mixed pattern. During 2005-06, the seasonal peaks of Exports occurred in the month of March, whereas, the seasonal peaks of Imports, Oil Imports and Non-Oil Imports occurred in May. The seasonal troughs varied over different months (Table 1). The seasonal peak of Exports occurred in the month of March throughout the reference period under study. The trough varied in the months of November and June. However, in the case of Imports, the seasonal patterns have been varying over the reference period (Table 3).

The seasonal peak of Non-Oil Imports occurred in the month of March, on an average, during the reference period, but there is a shift in its trough from April to February, from 2000-01 onwards. In the case of Oil Imports, the seasonal patterns have remained the same, with peak in May and trough in December.

The seasonal fluctuations were higher in the case of Exports than Imports over the reference period (Table 2 and Chart 9). Both Exports and Imports exhibited steady increase in seasonal fluctuations from 1999-00 to 2003-04. For the last two years, the seasonal fluctuations of both of the series have remained almost similar.

The seasonal variations of Oil Imports, which relatively are of very high magnitude, have, however been, showing declining tendency. On the other hand, the seasonal variations of Non-Oil imports had shown a steady upward movement from 2000-01 onwards (Table 2).

A comparison of seasonal factors of Broad Money and WPI-All Commodities (base 1993-94=100) during 2005-06 shows that, seasonal peaks and troughs of Broad Money occurred in the months of April and September,

respectively, whereas those of WPI-All Commodities occurred in the months of September and February, respectively. It may be noted that, during September, Broad Money had trough, whereas, WPI-All Commodities had peak (Chart 10).

The seasonal factors of IIP-Manufacturing are more fluctuating as compared to those of WPI-Manufactured Products, during 2005-06 (Chart 11). The WPI-Manufactured Products had its seasonal peak and trough in the months of September and January, respectively, whereas, the seasonal peak and trough of IIP-Manufacturing occurred during the months of March and April, respectively (Table 1). The prices of Manufactured Products have become less susceptible

to seasonal variations, whereas, the production continues to get influenced by the seasonal demand and supply factors.

A comparison of seasonal factors of WPI-Food Products and IIP-Food Products reveals that, during 2005-06, seasonal peak and trough of WPI-Food Products occurred in the months of July and December, respectively, whereas that of IIP-Food Products occurred in the months of January and August, respectively (Table 1 and Chart 12). The seasonal factors of WPI-Food Products are less fluctuating as compared to those of IIP-Food Products. With the advancement of technology, the quality of preservation of food products has improved and as a result, the supply factor can easily meet with the demand. The seasonal trough of WPI-Food Products varied in the months of March and December, and the peak months varied over July, August and September.

The ranges of seasonal factors of Bank Credit and Index of Industrial Production (IIP) revealed similar movements over the reference period (Chart 13). The range of seasonal factors of Bank Credit has declined from 5.9 in 1995-96 to 3.0 in 2004-05 but in 2005-06, it again increased marginally to 3.2. Similarly, the range

of seasonal factors of the IIP declined from 14.4 to 12.0 during the same period; a marginal increase was noticed in 2005-06.

The range of seasonal factors for IIP-General Index was decreasing throughout the reference period, whereas, the range of seasonal factors for Imports showed decreasing trend from 1995-96 to 1998-99, and thereafter it increased steadily up to the year 2003-04. For the last two years, the seasonal fluctuations of Imports have been similar (Chart 14).