The first principal component that is extracted from that estimation is then transformed into a core inflation rate measure using a simple linear regression of the annual CPI inflation rate, excluding the effect of changes in indirect taxes, on an intercept and on the first principal component. This process is performed monthly using the historical data series, starting in 1990.
Yet, there are underlying strengths that can be built upon to buffer the external sector from these risks. The search for new export markets and new niches must go on so as to reap the benefits of changing dynamics of global value chains. Indian IT companies need to accelerate market diversification and invest in new skills and technologies to hone their comparative advantage.