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1.1 Background of Study
1.1 Background of Study
INTRODUCTION
1.1 Background of Study
Economic Survey is the document prepared by Ministry of Finance, Government of
Nepal. Effort is made to the extent possible, to bring sector programs into one report
although different entities are responsible to implement the programs. This Economic
Survey for the fiscal year 2013/14 is prepared with analytic review of policies that the
country has adopted in major sectors of the economy, and achievements made through
implementation of such policy based programs. Data of the previous years has been
updated and provided as a part of this report.
The real GDP is estimated to grow by 5.2 percent at basic prices and 5.5 percent at
producers' prices against the target of 5.5 percent for current fiscal year 2013/14. Such
growth rate had remained at 3.5 percent at basic prices and 3.9 percent at producers'
prices in the previous year. Favorable climates, improved investment environment,
timely release of budget are attributable factors for such a rise in the economic growth
in current fiscal year as compared to the previous fiscal year.
Production of the agriculture sector is estimated to grow by 4.7 percent in current
fiscal year 2013/14. Such growth rate was just 1.1 percent last year. The nonagriculture sector is estimated to grow by 5.3 percent in current fiscal year, while this
sector had grown by 4.6 percent last year. Among the non-agriculture sector, growth
rates of industry and services sector are estimated to remain at 2.7 percent and 6.1
percent respectively in current fiscal year while these figures were2.5 percent and 5.2
percent respectively in the previous fiscal year.
The structure of Nepalese economy has been changing gradually. Contribution of
agriculture and industry sectors to GDP showed a declining trend while that of services
sector showed the opposite. From the sectoral perspective, the contribution of primary,
secondary and tertiary sector contribution to nominal GDP are estimated to remain at
33.7 percent, 14.1 percent and 52.3 percent respectively. While classifying GDP into
agriculture and non-agriculture sectors, contribution of the agriculture sector showed
declining trend while the non-agriculture sector showed the opposite. Contribution of
the agriculture sector to GDP at current prices stood at 37.4 percent in FY 2001/02,
while it has come down to 33.1 percent in current fiscal year 2013/14.
Analysis of sector-wise economic growth for the last decade reveals that though the
growth rate of the services sector remained satisfactory, industry sectors growth rate
did not record as such. Except for three fiscal years, services sector recorded a growth
of over 5.0 percent in the other fiscal years. During this period, the growth rate of
agriculture sector was much more influenced mainly by the climate factor and supply
of seeds and fertilizers, while the industry sector under the non-agriculture sector was
greatly influenced by the investment environment, labor problems, energy crisis, and
prolonged political transition among others.
Estimated government expenditure for the fiscal year 2013/14 is higher by 44.2
percent as compared to actual expenditure of FY 2012/13. Of Rs. 404.82 billion
expenditure allocated for FY 2012/13, actual expenditure amounted to Rs. 358.63
billion only. Actual total expenditure was Rs. 339.16 billion in fiscal year 2011/12 with
an increase of 15 percent thatis increased by 5.7 percent in FY 2012/13.
The Government expenditure in FY 2012/13 remained low mainly due to political
crisis, which emerged after dissolution of the Constituent Assembly on 28th May 2013,
failure of political parties to forge consensus to bring full budget in the beginning of the
fiscal year, and announcement of full budget only by mid-March upon completion of
the second trimester of the fiscal year.
The Government income (Revenue and Grants) is estimated to reach Rs.429.53
billion in FY 2013/14 with 28.6 percent growth in comparison to the actual income in
FY 2012/13. The government income had grown by 15.9 percent reaching Rs. 333.92
billion in FY 2012/13 as compared to its preceding year. Such income had grown by
17.2 percent reaching Rs. 287.98 billion in FY 2011/12 as compared to its preceding
year.
Gross Domestic Product: Gross domestic product (GDP) is the market value
of all officially recognized final goods and services produced within a country in a
year, or over a given period of time. GDP per capita is often used as an indicator of a
country's material standard of living.
GDP can be determined in three ways, all of which should, in principle, give the same
result. They are the production (or output) approach, the income approach, or the
expenditure approach. We have used production approach the study of GDP of Nepal.
remaining
after
all operating
expenses,
interest,
taxes and
preferred stock dividends (but not common stock dividends) have been deducted from
a company's total revenue.
government. It is an important tool of the fiscal policy of the government and is the
opposite factor of government spending. Revenues earned by the government are
received from sources such as taxes levied on the incomes and wealth accumulation of
individuals and corporations and on the goods and services produced, exported and
imported from the country, non-taxable sources such as government-owned
corporations' incomes, central bank revenue and capital receipts in the form of external
loans and debts from international financial institutions.
construction, wholesale, transport and real state, which have a significant impact on the
GDP of the country.
1.4 Methodology
This study report is based secondary information which was published on Economic
Survey 2013/14 by Ministry of Finance.
For statistical results, we have used Microsoft Excel 2010. We have used population
samples from 2005-2013 for the analysis.
We have computed the following statistics to come to conclusion.
Descriptive statistics
Descriptive statistics is the discipline of quantitatively describing the main features of a
collection of data or the quantitative description itself.
Some measures that are commonly used to describe a data set are measures of central
tendency and measures of variability or dispersion. Measures of central tendency
include the mean, median and mode, while measures of variability include the standard
deviation (or variance),
the
minimum
and
maximum
values
of
the
Mean
The arithmetic mean is the most common measure of central tendency. The mean is the
only common measure in which all the values play an equal role. Since all the values
play an equal role, a mean is greatly affected by any value that is greatly different from
others in the data set. In case of extreme values, we should avoid using mean as a
measure of central tendency.
Median
The median is the middle value in an order array of data that has been ranked from
smallest to largest. Half of the values are smaller than or equal to the median and half
of the values are larger than or equal to the median. The median is not affected by
extreme values so it is possible to use median when extreme values are present.
Mode
The mode is the value in a set of data that appears most frequently. Like the median and
unlike mean, extreme values do not affect the mode.
Standard Deviation
The standard deviation is the measure of dispersion. It denotes how the data vary from
the central position or mean. Standard deviation shows how much variation or
"dispersion" exists from the average.
The coefficient of variation measures the scatter in the data relative to the mean. It is
the measure of consistency of the data.
variation or riskiness.
Skewness
Kurtosis
Kurtosis measures whether the data is sharp or flat relative to a normal distribution. It
focuses on how returns are ranged around the mean.
CHAPTER II
ANALYSIS AND FINDINGS
2.1 Descriptive Analysis:
There are many sectors which has a direct impact on GDP. Out of them agriculture,
manufacturing, construction, wholesale, transport and real state has greater impact than
other variables.
Table 1: Contribution of different sectors in GDP for year 2012/13
Contribution of different sectors in GDP for year 2012/13
52786.9
Manufacturing
10031.2
Construction
10897.9
22874.7
14053.7
13858.7
Others
33302.7
Source: Economic Survey 2013/2014,Ministry of Finance
Manufacturing
6%
Construction
7%
106166.30
13395.06
98827.20
40185.19
1614849180.20
-1.41
0.39
110323.09
58941.17
169264.26
955496.72
9.00
Source: Economic Survey 2013/2014,Ministry of Finance
80000.0
60000.0
40000.0
20000.0
0.0
2005 2006 2007 2008 2009 2010 2011 2012 2013
2.1.1
Data Interpretation
The mean GDP is Rs. 106.2 billion. Since the maximum value and minimum value are
too extreme, the mean is affected by these variables. This indicates that there is high
difference between the GDP. Similarly, the median for GDP is Rs. 98.8 billion, which
divides the data into two equal parts so that there are equal data above and below the
median. The standard deviation for the GDP is Rs. 40.2 billion, which shows high
deviation of data from the average. Likewise, the skewness is 0.39, which shows that
the data is right skewed. Most values are concentrated on right of the mean, with
extreme values to the left. The minimum GDP during the nine fiscal years is Rs. 58.9
billion and the maximum GDP during the nine fiscal years is Rs. 169.3 billion. Since
frequency is not available, mode cannot be calculated. The kurtosis is -1.41, which
shows platykurtic distribution. It is flatter than a normal distribution with a wider peak.
The probability for extreme values is less than for a normal distribution, and the values
are wider spread around the mean.
Box-plot summary
Coefficient of Variation
Manufacturing and transportation are important contributors to the GDP of Nepal. So,
we have tried to find out which one is more consistent in terms of increase in the
amount contributed.
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
7398.76
671.66
7092.40
10031.24
2014.97
4060104.33
-1.60
0.16
5247.21
4784.03
10031.24
66588.81
9.00
Transport
10053.42
976.12
9530.40
14053.73
2928.35
8575226.46
-1.30
0.22
7928.78
6124.95
14053.73
90480.76
9.00
T- test
Here, we have two variables the rate of increase in government revenue and rate of
increase in government expenditure. We want to check whether the population
average of rate of increase in revenue and rate of increase in expenditure are equal or
not.
Table 4: Rate of increase in revenue and Rate of increase in expenditure
Particulars
2009/10
2010/11 2011/12
2012/13
11.45
23.19
21.13
19.75
13.38
14.51
2.44
45.17
expenditure
H0: 1= 2
Null hypothesis: The population mean of rate of increase in revenue and rate of
increase in expenditure are equal.
H1: 1 2
Alternate hypothesis: The population mean of rate of increase in revenue and rate of
increase in expenditure are not equal.
Table 5: T-test for rate of increase in revenue and rate of increase in expenditure
t-Test: Two-Sample Assuming Equal Variances
% increase in Revenue
Mean
Variance
Observations
Pooled Variance
% increase in Expenditure
18.88
18.87
26.522
337.05
181.78
Hypothesized Mean
Difference
Df
t Stat
0.0005
P(T<=t) one-tail
0.49
t Critical one-tail
1.94
P(T<=t) two-tail
0.99
t Critical two-tail
2.44
From the data above the tstat value was found out to be 0.0005 while the tcritical value
was 2.4469. Since, tcritical > tstat, so the null hypothesis is accepted. At 5% level of
significance, there is enough evidence that the population mean of rate of increase in
revenue and rate of increase in expenditure are equal.
Also, since the value of P is 0.999 > 0.05. We can conclude that the population mean of
rate of increase in revenue and rate of increase in expenditure are equal.
10
ANOVA
Here, we have five variables agriculture and forestry, fishing, mining and quarrying,
manufacturing and electricity, gas and water. We want to check whether the population
average of these growth rates of different sectors are equal or not.
H0: 1= 2 = 3= 4= 5
Null hypothesis: The population mean of the growth rate of different sectors is equal.
H1: 1 2 3 4 5
Alternate hypothesis: The population mean of the growth rate of different sectors is not
equal.
Table 6: Growth rate for different sectors
Industries
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
Agriculture
3.45
1.67
0.94
5.80
2.98
1.99
4.49
4.58
1.07
Fishing
7.13
9.91
3.01
7.29
5.31
3.55
5.88
7.53
2.71
Mining and
6.80
8.26
1.48
5.46
0.72
2.14
2.01
5.03
3.30
Manufacturing 2.62
2.00
2.55
-0.87
-1.05
2.96
4.05
3.63
3.72
Electricity gas
4.01
13.00
1.06
-3.44
1.87
4.43
8.30
0.28
and forestry
Quarrying
3.97
and water
Source: Economic Survey 2013/2014,Ministry of Finance
Table 7:ANOVA result
Anova: Single Factor
SUMMARY
Groups
Count
9
9
9
9
9
ANOVA
Source of Variation
Between Groups
Within Groups
Total
SS
Sum
Average Variance
26.97
3.00
2.94
52.33
5.81
5.82
35.18
3.91
6.76
19.61
2.18
3.58
33.48
3.72
22.66
df
65.90
334.14
4
40
400.04
44
MS
16.47
8.35
F
1.97
P-value
0.12
F crit
2.61
11
We have found out the Fstat to be 1.97, while the Fcrit value was 2.61. Since the
Fcrit>Fstat, null hypothesis is accepted. At 5% level of significance we can conclude
that there is enough evidence that the population mean of the growth rate of different
sectors (agriculture and forestry, fishing, mining and quarrying, manufacturing and
electricity, gas and water) is equal.
Correlation
If a change in one variable affects the change in other variable also, then these two
variable are said to have correlation. It is a measure of strength of linear association
between two variables. It lies between +1 and -1. If correlation is +ve, we have a +ve
relationship and vice versa.
Table 8: Correlation between Total Production, Chemical fertilizer and Improved seeds
Total Production
Total Production
Chemical Fertilizer
( Metric Ton)
(Metric Ton)
Improved Seeds
( Metric Ton)
Chemical Fertilizer
0.7496
-0.1507
-0.3309
(Metric Ton)
Improved Seeds
Now,
Calculation of Variance Inflation Factor (VIF):
Between Chemical fertilizer and improved seeds
VIF
= 1/ (1-r 2)
= 1/ (1- (-0.3309)2)
= 1.12
Since, VIF between chemical fertilizer and improved seeds is less than 10 the multi-colinearity does not exist.
Regression
Regression is a way of describing how one variable, the outcome, is numerically related
to predictor variables. The dependent variable is also referred to as Y. The predictor
12
The simple linear regression equation can be generalized to take account of n predictors
and this is the multiple regression equation for the n variables.
Y = + 1x1+ 2x2++ nxn
Where is the intercept, is the coefficient of the multiple regression.
Note: For the purpose of this lab assignment we have considered the three variables to
compute the regression equation that is one dependent variable Y and two independent
variables X1 and X2. Therefore, the regression equation is given as:Y = + 1x1+ 2x2
Table 9: Total production, chemical fertilizer and improved seeds
Year
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total Production
(000 Metric Tons) (y)
4277.7
4596.82
4698.46
4693.59
4931.2
5183.36
5403.37
5747.62
5879.9
Chemical Fertilizer
Improved Seeds
(Metric Tons) (x1)
(Metric Tons) (x2)
18458
2748.543
8136
3514
12751
3380
3285
3781
3157
3947
42178
4337.3
29604
4192.34
45672
2348
145653
2946
Source: Economic Survey 2013/2014,Ministry of Finance
13
We have taken total production as an dependent variable (y), which depends upon the
independent variables chemical fertilizer(x1) and improved seeds(x2).
Table 10: Computation of regression equation
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.76
R Square
0.57
Adjusted R Square
0.43
Standard Error
412.18
Observations
9.00
ANOVA
df
Regression
Residual
Total
Intercept
Chemical Fertilizer
Improved Seed
2
6
8
SS
1365104.56
1019339.39
2384443.95
MS
682552.28
169889.90
t Stat
5.19
2.78
0.39
Significance F
4.02
0.08
P-value
Lower 95% Upper 95% Lower 95.0% Upper 95.0%
0.00
2332.90
6488.17
2332.90
6488.17
0.03
0.00
0.02
0.00
0.02
0.71
-0.47
0.65
-0.47
0.65
(2.78)
(0.39)
14
Interpretation
R= 0.76 means the multiple correlation between the total agriculture output, chemical
fertilizer and improved seed is 76%. There is positive relationship between the
variables.
R2= 0.57 means 57% of variation in total agricultural output is explained by linear
relationship of chemical fertilizer and improved seeds , while 43% of variation remains
unexplained.
F= 4.02 using the 0.05 level of significance from the table the critical value of F
distribution is more than the F statistical value, we accept the null hypothesis and
conclude that the total agricultural output is significantly related to the chemical
fertilizer and improved seeds.
Table 11: Prediction using the Regression equation
Predicted Y
Total Production
Residuals
4830.12
4277.70
-552.42
4798.40
4596.82
-201.58
4830.94
4698.46
-132.48
4775.32
4693.59
-81.73
4788.72
4931.20
142.48
5198.06
5183.36
-14.70
5064.46
5403.37
338.91
5056.31
5747.62
691.31
6069.68
5879.90
-189.78
Total Production
2000.00
1000.00
0.00
2005 2006 2007 2008 2009 2010 2011 2012 2013
15
From the above figure, we can see that the difference between the predicted production
and actual production is very less. So, our line of fit is good.
Forecasting
Forecasting is the process of making statements about events whose actual outcomes
(typically) have not yet been observed. A commonplace example might be estimation
of some variable of interest at some specified future date. Prediction is a similar, but
more general term. Both might refer to formal statistical methods employing time
series, cross-sectional or longitudinal data, or alternatively to less formal judgmental
methods. Usage can differ between areas of application: for example, in hydrology, the
terms "forecast" and "forecasting" are sometimes reserved for estimates of values at
certain specific future times, while the term "prediction" is used for more general
estimates, such as the number of times floods will occur over a long period.
Risk and uncertainty are central to forecasting and prediction; it is generally considered
good practice to indicate the degree of uncertainty attaching to forecasts. In any case,
the data must be up to date in order for the forecast to be as accurate as possible.
16
0.98
0.97
0.96
156.56
9.00
ANOVA
df
SS
MS
5058245.42 5058245.42
171575.62 24510.80
5229821.04
Regression
Residual
Total
1
7
8
Intercept
X Variable 1
Coefficients
Standard Error
-579755.21
40605.37
290.35
20.21
F
Significance F
206.37
0.00
t Stat P-value
-14.28
0.00
14.37
0.00
Lower 95%
Upper 95% Lower 95.0% Upper 95.0%
-675771.64 -483738.77 -675771.64 -483738.77
242.56
338.14
242.56
338.14
Predicted Production
Actual Production
Residuals
2005
2399.882222
2629.79
229.907778
2006
2690.233889
2725.55
35.3161111
2007
2980.585556
2873.77
-106.815556
2008
3270.937222
3169.46
-101.477222
2009
3561.288889
3440.61
-120.678889
2010
3851.640556
3711
-140.640556
2011
4141.992222
4034.6
-107.392222
2012
4432.343889
4613.57
181.226111
2013
4722.695556
4853.25
130.554444
17
For the next three years we have forecasted the following outputs:
Table 15: Forecast for next three years
Year
Total Production
(000 Metric Tons)
2014
5013.12
2015
5303.48
2016
5593.83
So, the forecasted outputs for the next three years i.e. 2014, 2015, 2016 are 5013.12,
5303.48, and 5593.83 (000 metric tons) respectively.
18
CHAPTER III
CONCLUSION
3.1 Conclusion:
From our analysis, we have found that chemical fertilizer has a positive correlation with
the total agricultural production. 57% of the variation of the total agricultural
production can be explained by its relationship with chemical fertilizers and improved
seeds.
The forecasted outputs for the next three years i.e. 2014, 2015, 2016 are 5013.12,
5303.48, and 5593.83 (000 metric tons) respectively.
By using T-test, we found out that at 5% level of the population mean of rate of
increase in revenue and rate of increase in expenditure are equal.
Using ANOVA, we also found that at 5% level of significance there was significant
evidence that the population mean of the growth rate of different sectors (agriculture
and forestry, fishing, mining and quarrying, manufacturing and electricity, gas and
water) were equal.
19