NRI Achievement : Lakshman Achuthan Business-Cycle Forecaster
Lakshman Achuthan
"ECRI has gained a lot of attention, especially in the recent past, due to its accurate forecasts of the direction in which the economy was moving, said Lakshman Achuthan, the managing director and director of research at the famed Economic Cycle Research Institute (ECRI), during an exclusive interview with this writer. If ECRI is an independent organization focused on business cycle research and forecasting for many years now, Achuthan has become its public face, presenting the findings to the corporations and the public, who eagerly seek out the research findings.
ECRI is an independent institute dedicated to economic cycle research in the tradition established by its founder, Geoffrey H. Moore, whom The Wall Street Journal called ‘the father of leading indicators." When Moore passed away in 2000, his former student, Alan Greenspan, called him "a major force in economic statistics and business cycle research for more than a half-century." Moore developed the first list of leading indicators of recession and recovery in 1950, the composite index method in 1958, and the original index of leading economic indicators (LEI) in 1967. "Geoffrey Moore was a giant in business cycle research, and I am fortunate that I have had him as my mentor, said Achuthan.
Today, ECRI represents the third generation of researchers carrying on this tradition of cyclical investigation. Continuing in the tradition established by ECRI's founder, Geoffrey H. Moore., ECRI is a trusted advisor of Fortune 500 companies, major fund managers, and government agencies throughout the world. In early 1996. the American Economic Association awarded its highest honor, often said to be second only to the Nobel Prize in economics, to ECRI's founder, Geoffrey H. Moore.
Laxman's family lived in Wisconsin at the time of his birth, as his father was teaching at University of Wisconsin-Madison. When young Laxman was a year-old, his family moved to South Hampton on Long Island, NY. After completing his 8th Grade in a private school on Long Island, Laxman went to a Boarding School in Vermont, from where he completed his High School.
Before enrolling in a college, Laxman took a semester off to tour several cities and countries across Europe, which opened up his heart and mind to a "different world. In 1988, after completing his Bachelor's Degree in Economics and Finance, young Laxman started "selling Real Estate on Long Island, during the housing downturn era. His ongoing interest in international business led him to enroll in a MBA program at Long Island University.
His long career as a Business-Cycle Forecaster started in 1990, when through a professor in College. Laxman Achuthan was introduced to Columbia Business Research Institute in New York City. In 1995, when the entire staff moved out, Achuthan who had worked without an official title contributing to the research by Moore, found himself in the newly founded, Economic Cycle Research Institute, where he has grown to be the "public face of all the research being done at the Institute. "My skill and job lies in communicating the findings of our research in Applied Economic to business leaders and policy makers, he says with a sense of pride and elation. Lakshman Achuthan says, he plays "a key role in helping asset managers, corporate strategists and policy makers regularly use cyclical forecasts in their decision making process. He appears regularly on CNN's Moneyline, CNBC, and NPR, and has been featured in Money magazine and The Economist.
"The 21st century began with the first global recession in a generation, bringing a worldwide boom to an abrupt end," Achuthan said. "While the major economies have all pulled out of that synchronized recession, global growth halfway into the new decade remains lackluster, and job growth in the largest economies, in particular, has remained deficient. The reasons are both cyclical and structural, explained Achuthan.
While the consensus among economists was that the U.S. economy could take an unusually long time to recover after the popping of the tech-stock bubble and the shock of Sept. 11's terrorist attacks, Lakshman Achuthan believed that the economy was fully on the mend--and saw little chance of the "double dip" recession that so many economists feared. Using techniques devised by the late Geoffrey Moore, the economist who in the 1960s invented the index of leading economic indicators, he and his influential economic research firm are at catching turning points in the business cycle. Indeed, they saw the start of this recession six months before it began.
In March 2001, Achuthan stunned everyone by announcing that the US, after ten years of the longest and most sustained growth in its history, had entered a recession. US officially confirmed the recession of its economy by the end of the year. And they called a recovery, weeks before federal officials began suggesting the recession was over.
Again, Achuthan recalls, "In 1987, after the crash, when a lot of standard leading indexes were suggesting there might be a recession ahead. Our long leading index was very clear: There was no recession in sight. And he was proved correct. "We're business-cycle forecasters. Our job is very much preserving and advancing and enhancing this business-cycle theory and approach, he says and adds, "It's a critical job--if we didn't do it, it might easily fall by the wayside. You know, just a few years ago, very prominent people were saying the business cycle was dead. And we had to stand up to that. "We're going through the longest stretch of concerted growth in decades, said Lakshman Achuthan.
ECRI's staff includes many researchers who worked with Moore during his long career. Their ongoing work encompasses two attributes that seem to conflict, but are actually complementary "continuity and innovation. "A high degree of continuity and institutional memory in its studies, combined with a high degree of innovation in the evolution of our research due to changes in the data, economic structure, and progress in the relevant sciences, help preserve and advance our long tradition of business cycle research,' said Achuthan.
And when asked as to what makes him and ECRI different from all the other economic forecasters, he says, "I think everybody else is very, very good, particularly between turning points, between the troughs and the peaks, he says with modesty. "Our forecast is a necessary complement to standard forecasting techniques. In other words, you should check if we see a turning point. If we don't see a turn and we agree with the standard forecasters, then they are very likely to be right--or at least the risk of them being wrong is very low. Then, when we do see a turning point, the risk of that standard forecasting technique being wrong has gone way up.
Lakshman, whose father Radh Achuthan is a Keralite, praised the growth model of India, which was of "low inflation and higher growth level, which is very unique in the world, he said. This factor attracted several US firms toward India, especially in the 1990s, when they were seeking to lower the cost and getting higher profits, Achuthan said. Although, India is on path to higher growth in the coming decades, Achuthan lamented that "too many people in India are left out of the boom.
Achuthan, while describing the factors that had led to the liberalization of the Indian economy since the early 1990s, said, "It all started with the Gulf War I, when many immigrants to the Middle East had to return to India, nearly emptying the cash-flow and the foreign reserves of India. It was from here, the seeds of economic liberalization were sown, the fruits of which the Indian economy is reaping in these years, he said.
Beating the Business Cycle: How to Predict and Profit from Turning Points in the Economy, a book by Lakshman Achuthan and Anirvan Banerji, has received rave reviews. Written in an accessible style, the book reveals just how advanced the state of the art in cyclical forecasting has become. It also shows how decision makers at all levels "managers, small business owners, and individuals "can see into the economy's future when making key decisions.
Achuthan is the managing editor of ECRI's forecasting publications and regularly participates in a wide range of public economic discussions. He is a member of Time magazine's board of economists, the New York City Economic Advisory Panel, and serves as trustee on a number of non-profit boards. Laxman Achuthan married Tracy White, "a story teller, in 2001 and the couple are expecting the arrival of their first child in the near future.
Achuthan comes from an illustrious family of intellectuals and community activists in India. When asked of any awards or honors he had received, Achuthan, who was honored in 2007 with the Kerala Center Annual Award, said, "My greatest achievement has been the feeling of satisfaction over contributing in the longest ever growth span of the US economy, where millions of poor were given jobs, thus razing them above poverty levels.
