CONNECTION OF EACH MACRO FACTORS

Relation between crude price and other indicator

Rising crude oil prices are driving up transportation and heating costs. These are the costs required for most products.
Hence the cost of production increases. Thus, inflation occurs. Inflation in crude oil is a good enough cause for
inflation. A major problem with inflation is that purchasing power is declining. Thus, industrial production begins to
decline, as does GDP. This will increase the trade deficit. Rising crude oil prices will strengthen the dollar and
weaken the rupee. To reduce inflation, money needs to be withdrawn from the economy, for which the Reserve Bank
raises the capital reserve ratio and raises corporate tax rates and personal income tax rates. This can lead to a decline
in corporate profits. This will lead to unemployment. The decline in the profits of companies will adversely affect the
stock market.

Relation between GDP and other indicators

GDP enables policymakers and central banks to judge whether the economy is contracting or expanding, whether it
needs a boost or needs to be restrained, and if threats such as a recession or rampant inflation loom on the horizon. If
GDP rises, IIP and PMI will rise and production will increase. There by reducing the current deficit and trade deficit.
This is a stimulus to the economy. It also reduces the fiscal deficit. The rupee appreciates as the GDP grows. It
stimulates GDP growth by reducing corporate taxes. This creates a lot of jobs and reduces unemployment and
Increases revenue to the stock market. However, too much GDP growth is also dangerous, as it will most likely come
with an increase in inflation.

Relation between inflation and other indicators

Inflation raises the price of goods and services and lowers consumer confidence. As business costs increase and as
part of reducing it, layoffs occur and unemployment rises. This will increase the trade account deficit and the current
account deficit. There by increasing government spending and increasing fiscal deficits. As part of the withdraw the
money in the market, the central bank will increase the CRR ratio in addition to the corporate tax rate and the
personal income tax rate and increase the repo rate and reverse repo rate. The PMI is declining and GDP is declining
due to high costs, thereby depreciating the rupee. This adversely affects the stock market.

Relation between repo rate and other indicators

When the repo rate is increased by the central bank, the cash flow in the market decreases and it increases the cost of
borrowing by companies and people. This increases the risk of closure of companies and leads to unemployment.
Thus reducing the money supply in the market helps in reducing inflation and strengthening the rupee. Decreasing
the money supply in the market leads to a decrease in exports, This widens the trade deficit and the current deficit.
When production becomes difficult, government taxes fall, leading to a widening fiscal deficit. Increasing the repo
rate lowers the PMI and leads to a decline in GDP. Decreasing the price of products increases the interest of
consumers. This adversely affects the stock market.

Relation between CRR and other indicators

Increasing the CRR ratio as part of reducing cash flow to the market reduces the cash flow to the market thereby
reducing inflation. Keeping large amounts of money in reserve will make it harder for companies, to reduce funding
and reduce production. This increases unemployment. Dividends from companies are declining. The PMI index
decreases and the trade deficit and current deficit increase. The fiscal deficit increases or decreases based on
government policy. Consumers are more interested because of the lower prices. The stock price is falling. GDP falls
and the rupee depreciates.

Relation between Balance of Trade and other indicators

When more money reaches the hands of companies, the trade deficit decreases and thus the current deficit decreases.
Unemployment is declining. Cash flow in the market will increase and lead to inflation. In case of inflation, repo rate
and CRR rate are increased. The fiscal deficit may increase or decrease depending on government policy. The PMI
index increases the cash flow in the market. Higher prices of goods reduce consumer interest. Corporate tax rates
usually do not change because this situation makes the country attractive by starting a new business. Personal tax
rates cannot be increased due to rupee inflation. As production increases, the trade deficit will decrease and the rupee
will strengthen. GDP is increasing. Stock market return is increase.

Relation between India Current Account and other indicators

As the current account deficit decreases, so does the trade deficit. This means that there is cash flow to the
companies. This reduces the unemployment rate. Inflation is rising as the money supply in the market increases. As
inflation rises, so does the repo rate and the CRR ratio. Increases or decreases the fiscal deficit in accordance with
government policies. Rising prices of products reduce consumer interest. The corporate tax rate does not change to
encourage businesses to enter the country. The personal income tax rate does not increase as inflation rises. As
production increases, the PMI increases and so does the return on the stock market. As a result, GDP rises and the
rupee strengthens.

Relationship between PMIs and other indicators

PMI Rising means companies have access to cash. This will increase productivity and reduce unemployment.
Inflation is happening. Increases repo rate and CRR rate to reduce inflation. Trade deficit and current deficit are
declining as production and exports are doing well. The fiscal deficit depends on government policy. Purchasing
interest decreases as the price increases. Profits are rising in the stock market. GDP will increase and hence the rupee
will appreciate.

Relation between Covid-19 and macro factors

Covid-19 greatly affects the production and liquidity of the pandemic market. Production was very low or zero.
Lockdown production was completely stopped as a result of the corona virus. This led to unemployment. IIP and
PMI are very low. Trade deficit and current deficit increased. Government spending increased and the fiscal deficit
rose. The government had to come up with big plans to hold the market. Cash flow in the market decreased and
liquidity decreased. The CRR ratio was lowered, the repo rate and the reverse repo rate were lowered, and interest
rates were lowered in order to increase the cash flow in the market and create inflation. The stock market also fell
sharply. Crude oil prices fell as consumption did not pick up. Geopolitical conflicts and Covid-19 pandemic pushed
up the price of gold. The rupee depreciated as well as the GDP declined due to the crisis.

Great view of financial year 2021

In the 2021 financial year, production will increase and manufacturing PMI and service PMI will increase. There by
reducing unemployment. Inflation is reduced. As inflation is needed in this scenario, the interest rate and the reverse
repo rate will be reduced to increase inflation and the CRR will remain unchanged. The increase in Covid-19 globally
and in India will affect exports, increase the trade deficit and increase the current deficit. The fiscal deficit is
increasing as the recovery of the economy is costly for the government. In this case the corporate tax rate will not be
increased to promote business setting. And personal income tax does not increase. Foreign direct investment will
increase as production increases. The stock market will rise. The consumer price index will increase. Although the
GDP is rising, the rupee is not going to strengthen that much.

SUBMITTED BY

SABIN SUNNY