INDEX

S.No. Topic Page no.

1 Introduction 4
2 Methodology 5
3 Data Collection 6
4 Regression Analysis 7
5 Findings and Interpretation
6 Conclusion
7 Annexures
8 References
 INTRODUCTION

The entire world is a mixed of developed, developing an under developed countries which are
continuously striving in order to earn a special position and project them as a strong nation.
However, all of them are affected by various macroeconomic and non-economic factors, to
which they have to deal very constructively. And this prowess determines a country’s
development stage. There are various macroeconomic variables to determine development
status of a country.

One of the key measures of a country’s economic growth is its Gross Domestic Product, or
GDP. Gross Domestic Product (GDP) is the total monetary or market value of all the finished
goods and services produced within a country's borders in a specific time period. As a broad
measure of overall domestic production, it functions as a comprehensive scorecard of the
country’s economic health.

In this report, we aim to analyse the impact that Consumption Expenditure (C), Net Export
(NX) and Government Expenditure (G) have on the GDP of India through a regression
analysis. Consumption Expenditure (C) is the spending by households on goods and services,
excluding new housing. Government Expenditure (G) refers to the purchase of goods and
services, which include public consumption and public investment, and transfer payments
consisting of income transfers (pensions, social benefits) and capital transfer. Net
Exports (NX) are a measure of a nation's total trade. The value of a nation's
total export goods and services minus the value of all the goods and services it imports equal
its net exports.

Over the next few sections, we have collected the data pertaining to the GDP, Consumption
Expenditure, Government Expenditure and Net Exports over the last 20 years. We have then
formulated a regression model and then analysed the impact that each of these have on the
country’s GDP.

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 METHODOLOGY

We have taken the year wise data related to consumption expenditure, government
expenditure and net exports. Then we have taken the GDP of India for the last 20 years. We
have then used regression analysis to analyse how the above three indicators affect the GDP
of country.

The data used to conduct this analysis is secondary data that has been gathered from the
following sources:

 https://data.oecd.org/
 https://www.imf.org/external/datamapper/datasets

All the data pertaining to the regression analysis is derived on MS Excel, screenshots of
which are available in the Annexures section.

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 DATA COLLECTION

Year C (in Billion $) G (in Billion $) NX (in Billion $) GDP (in Trillion $)
2000 44 1218.85 17.7 0.468395
2001 47.30 1355.12 12.9 0.485441
2002 51.60 1286.11 9.3 0.514938
2003 54.90 1342.01 9.3 0.607699
2004 60.06 1239.78 16.91 0.709149
2005 65.90 1773.11 20.15 0.820382
2006 73.90 1750.76 36.87 0.94026
2007 85.10 1777.35 75.9 1.217
2008 97.80 2150.90 129.1 1.199
2009 110.10 2085.27 106.1 1.342
2010 128.10 2352.67 126 1.676
2011 150.70 2460.81 162 1.823
2012 175.00 2866.88 202 1.828
2013 199.20 2696.42 154.3 1.857
2014 229.80 2327.64 155.2 2.039
2015 254.50 2160.05 144.7 2.104
2016 289.70 2328.31 113.6 2.29
2017 318.20 2697.10 118.7 2.652
2018 357.50 2930.23 148.1 2.719
2019 391.20 3350.88 148.1 3.202 

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 REGRESSION ANALYSIS

In order to understand the relationship between India’s GDP, and unemployment, inflation
and trade in goods, we conducted regression analysis using 2 different methods –

(i) Simple Linear Regression Analysis

(ii) Regression Analysis using Matrix Algebra in MS Excel

SIMPLE LINEAR REGRESSION ANALYSIS

In order to find out the regression equation, we first calculate the summary output of all the
variables. This output has been shown in Annexure 1.

The Correlation Coefficient measures the strength of a linear relationship between two

variables. As can be seen in Annexure 1, the correlation coefficient of the variables is
0.966831022404001.

The Coefficient of Determination, which is used as an indicator of the goodness of fit. It

shows how many points fall on the regression line. As can be seen in Annexure 1 is
0.934762226, which means that there is a 93.476% fit between the GDP of a country and its
unemployment rate, inflation rate and the trade value.

We make use of the data in the coefficients table for deriving our regression equation. As can
been in Annexure 1, the regression equation derived is as follows:

Y = 0.33 - 0.06X 1 + 0.02X2 + 6.68X3 + Ut

REGRESSION ANALYSIS USING MATRIX ALGEBRA IN MS EXCEL

In order to find out the regression equation, we calculate the Beta Coefficients of all variables
using matrices and deriving the solution matrix (X’X)-1(X’Y) for the respective variables.
This output has been shown in Annexure 2.

The regression equation derived is as follows:

Y = 0.33 - 0.06X 1 + 0.02X2 + 6.68X3 + Ut

Thus, the equations derived by the two methods are the same.

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FINDINGS AND INTERPRETATIONS

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 ANNEXURES

Annexure 1: Summary output of Regression Analysis

Annexure 2: Derivation of Beta Coefficients using Matrix Algebra in MS Excel

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