BUSINESS RESEARCH METHODOLOGY

Analysis of India’s GDP w.r.t. External Debt

GROUP MEMBERS:

1) Alfaz Memon (18-F-302)

2) Digamber Patil(18-F-313)
3) Shehzan Shaikh(18-F-324)
4) Binod Thakur(18-F-334)
Introduction
Gross Domestic Product (GDP) is a broad measurement of a nation’s overall economic activity. It
gives aggregate summary of all economic activities over a period of time. GDP is calculated in terms
of monetary value. Each product has some price value which includes the indirect business tax (IBT)
i.e. sales tax and excise duty. True GDP is obtained by eliminating the IBT. For all practical purpose
GDP at factor cost is used.

External loan (or foreign debt) is the total debt a country owes to foreign creditors; its complement
is internal debt which is owed to domestic lenders. The debtors can be the government,
corporations or citizens of that country. The debt includes money owed to private
commercial banks, other governments, or international financial institutions such as
the International Monetary Fund (IMF) and World Bank.

What is Trend?
Trend is the general tendency of the variable under consideration to take increasing or decreasing
values over a long period of time. Trend is also called ‘secular trend’. It exists in time series data on
any economic or business variable if there is a smooth, long run and general tendency of the variable
take increasing or decreasing values over the given period. Trend is the long run component of time
series data. If the variable does not show the tendency to take increasing or decreasing values then
it is deemed to have no trend. 2 Trend analyse is a time series analysis. Time series analysis is used
to detect patterns of change in statistical information over regular intervals of time. These patterns
are used to project the future and help to arrive at an estimate for the future. Thus, time series
analysis helps projection of the future value of variable through curve fitting.

Sample data:

RBI published GDP and external Debt data on its portal for public every year. We have taken the
time series data of GDP at factor cost and external debt India for the period 2011-2018.
 40000.00

35000.00

30000.00

25000.00

20000.00
GROSS TOTAL DEBT
15000.00 GDP at constant price
10000.00

5000.00

0.00
Dec-11

Dec-14

Dec-17
Mar-11

Mar-14

Mar-17
Jun-13

Jun-16
Sep-12

Sep-15

Sep-18
Fig 1. GDP vs external debt India (RBI)

Table 1(data from RBI)

Date EXTERNAL GDP at

DEBT(Rs constant
in billion) price (Rs
in
billion)

Mar-11 14194.07 19691.32

Jun-11 14828.05 19132.07

Sep-11 16680.74 20738.96

Dec-11 18383.47 21507.12

Mar-12 18441.67 20745.89

Jun-12 20562.08 20479.09

Sep-12 20167.15 21775.28

Dec-12 21601.42 22462.51

Mar-13 22247.34 22062.30

Jun-13 24180 21938.97

Sep-13 25307.45 23149.41

Dec-13 26458.35 23485.79

Mar-14 26822.14 23771.54

Jun-14 27240.24 23793.56

Sep-14 28084.81 24570.10

Dec-14 29076.41 24986.12

Mar-15 29715.42 25630.13

Jun-15 30701.88 25812.39

Sep-15 31585.53 26395.26

Dec-15 31766.83 27195.71

Mar-16 32175.63 27975.34

Jun-16 32503.12 27912.58

Sep-16 32266.15 28320.25

Dec-16 31001.33 28830.35

Mar-17 30570.13 29628.15

Jun-17 31414.11 29746.45

Sep-17 32386.8 30394.03

Dec-17 32816.01 31009.01

Mar-18 34445.29 31933.75

Jun-18 35276.38 31781.23

Sep-18 37041.42 32314.60

Independent and Dependent variable:

Trend analysis requires one independent value, external debt and one dependent variable,
economic factor. After finding the trend, we want to analyse the causes of the trend.

First we estimate the trend of GDP over a period then we find the cause of the same.

Dependent variable: GDP

Independent variable: External debt.

Nature of the Study:
Data analysis package of Microsoft Excel is used for the analysis of data and performing various
tests.

Regression test:
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.995008
R Square 0.99004
Adjusted R
Square 0.956707
Standard Error 2613.01
Observations 31

ANOVA
Significance
Df SS MS F F
Regression 1 2.04E+10 2.04E+10 2982.125 8.55E-31
Residual 30 2.05E+08 6827821
Total 31 2.06E+10

We considered GDP as dependent variable and external debt as independent variable for regression.

Correlation:
GDP at constant
EXTERNAL DEBT price

EXTERNAL DEBT 1

GDP at constant
price 0.933227262 1

Descriptive Statistics:
EXTERNAL DEBT GDP at constant
price

Mean 27094.88495 Mean 25457.07

Standard Error 1139.64605 Standard Error 715.6543

Median 29076.41 Median 24986.12

Standard Deviation 6345.280662 Standard Deviation 3984.595

Sample Variance 40262586.68 Sample Variance 15876995

Kurtosis - Kurtosis -1.19263

0.756203094

Skewness - Skewness 0.202734

0.587585882

Range 22847.35325 Range 13182.53

Minimum 14194.07 Minimum 19132.07

Maximum 37041.42325 Maximum 32314.6

Sum 839941.4335 Sum 789169.3

Count 31 Count 31

Z- test:
z-Test: Two Sample for
Means

GDP at constant
EXTERNAL DEBT price

Mean 27094.88495 25457.07258

Known Variance 40262586.68 15876995

Observations 31 31

Hypothesized Mean
Difference 0

Z 1.217055565

P(Z<=z) one-tail 0.111791538

z Critical one-tail 1.644853627

P(Z<=z) two-tail 0.223583075

z Critical two-tail 1.959963985

Anova: Single Factor
SUMMARY

Groups Count Sum Average Variance

EXTERNAL DEBT 31 839941.4 27094.88 40262587

GDP at constant 31 789169.3 25457.07 15876995

price

ANOVA

Source of Variation SS Df MS F P-value F crit

Between Groups 41577654.85 1 41577655 1.481224 0.228349 4.001191

Within Groups 1684187465 60 28069791

Total 1725765120 61

Conclusion:
R Square equals 0.99004 which a very good fit. 99% of the GDP is explained by the independent
variable External debt. R Square closer to 1, better the fit.

Significance F is equals 8.55E-31 which is less than 0.05 which makes our result reliable. We can use
independent variable. It’s better to run the regression until significance F is less than 0.05. Hence
independent variable is reliable.

Correlation values between GDP and External Debt implies that both are positively related.

If z < -z Critical two tail or z stat > z Critical two tail, so we can reject the null hypothesis.

Here 1.21 > -1.9599 and 1.21 < 1.9599 hence we can’t reject the null hypothesis.

Thus, means of both the populations don’t differ significantly.

F(1.4812) < F crit(4.001191), we can’t reject the null hypothesis. Two populations are equal.

Based on the above analysis and results we can rely on External Debt while forecasting the GDP and
GDP is dependent on External Debt.