Journal of Economics and Economic Education Research (Print ISSN: 1533-3590; Online ISSN: 1533-3604)


Arima Forecast For Indian GDP

Author(s): Triveni, Uday Kumar Jagannathan

The economy of India is a developing-mixed economy. It is the world’s seventh largest economy by nominal GDP. GDP is a very strong measure to the economic health of a country and it reflects the sum of total of the production of a country and as such comprises all purchases of goods and services produced by a nation and services used by individuals, firms, foreigners and the governing bodies. It is used as an indicator by almost all the governments and economic decision-makers for planning and policy formulation. Historically, India has classified and tracked its economy and GDP in three sectors: agriculture, industry, and services. The study tries to investigate the analysis of relation between GDP growth and sectoral implication in Indian context. The study used secondary data for the period 2005 to 2018. GDP Data was collected from the World Bank data base. India Sectoral Index Data was collected from the NSE-India Web-site. First, the GDP was decomposed into Trend, Seasonal and Random components. Next, GDP was forecasted using ARIMA coefficients after determination of suitable number of lag period using the ADF test as well as the PACF diagrams. Finally, correlation between Sectoral growth and GDP growth was computed to verify whether GDP growth can be used as a predictor of any of the Sectoral Index growth rates. The results indicate that the GDP growth has seasonal component associated with it and a 4 quarter lag serves as a good measure to forecast the GDP growth. Further the study shows poor correlation between all the selected indices and the growth rate in the GDP as well as lagged GDP (by 1 quarter).