Munich Personal RePEc Archive

Forecasting model of small scale

industrial sector of West Bengal

Bera, Soumitra Kumar

Calcutta University, Banaras Hindu University, North Eastern Hill

University

20 November 2010

Online at https://mpra.ub.uni-muenchen.de/28144/
MPRA Paper No. 28144, posted 18 Jan 2011 20:07 UTC
 Forecasting model of small

r
pe
scale industrial sector of West

pa
is
he th
Bengal.

l.
tm
r t at
fo th

.h
11
k d
oo ce

7n
Soumitra Kumar Bera

t l in

/v
BSc Economics (CU), MFT (BHU), PhD (NEHU)

bu nv

e7
soumitramac@gmail.com

co

m
pe is

lu
vo
Ec o no mic fo r e c a s ting ha s pa e
lo ng e nga ge d the a tte ntio n o f a c a d e mic ia n,

r
is tte

A/
th mi

p r o fe s s io na ls , p la nne r s a nd p o lic y ma k e r s . I n the fa c e o f unc e r ta intie s , a lmo s t

IM
ite m

IB
t c Co

e ve r y e c o no mic d e c is io n d e p e nd s up o n fo r e c a s ts . I f the fo r e c a s ts s ugge s t a

/C
ls
do rism

d is ma l p ic tur e a he a d , the n e c o no mic s ys te m ma y d o its b e s t to c ha nge the

na
ur
se gia
n'

s c e na r io s o tha t glo o my fo r e c a s ts ma y no t c o me tr ue . F o r e c a s ting invo lve s

/jo
ea a

om
im at Pl Pl

p r e d ic ting futur e va lue s o f e c o no mic va r ia b le s with a s little e r r o r a s p o s s ib le

.ib e: . c

.c
w c ry E

( Gup ta , 2 0 0 3 ) . F o r this p ur p o s e , fo r e c a s te r s ha ve e mp lo ye d va r io us time

ng
w ur ia P
w o g e

hi
:// l s la R

s e r ie s te c hniq ue s in s ho r t r un e c o no mic fo r e c a s ting. Amo ng the va r io us

lis
tp a s p he

ub

me tho d s o f fo r e c a s ting, the Auto - Re gr e s s ive I nte gr a te d M o ving Ave r a ge

ht igin ve ! T

ap
or vol are

( ARI M A) mo d e l, tho ugh c o mp lic a te d o ne , is a p o we r ful me tho d to ge ne r a te

in w
Be

a c c ur a te fo r e c a s ts in the s ho r t - r un witho ut invo lving e c o no mic the o r y

( M a k r id a k is , 1 9 9 8 ) .

The r e a r e q uite a fe w a nd no te wo r thy e mp ir ic a l a tte mp ts ma d e b y

r e s e a r c he r s to ge ne r a te e c o no mic fo r e c a s ts . N o ta b le a mo ngs t the m a r e : Sabia

1
 (1977) , Bawa (1980), Nachane (1981) , Bowersox (1981), Bowersox (1981), Ibrahim and Otsuki

(1982), Armstrong (1983), Mentzer (1984), Fildes (1984), Sarkar (1989), Poonam and Gupta

(1990), Diebold and Rudebusch (1991), Fildes (1992), Gupta (1993), Fildes (1995), Mentzer

r
pe
pa
(1995), Fildes (1998Sethi (1999) Razzaque and Ruhul Amin (2000), Naresh (2003), Gupta

is
(2002), Afzal (2002), Gupta (2003), Taylor (2003), Gupta (2004), Armstrong (2005), Armstrong

he th

l.
tm
r t at
(2006), Taylor (2006) and Gupta (2006) have generated the forecasts of economic variables for

fo th

.h
11
k d
India as well as abroad. F o r e c a s ting a t ma c r o a nd mic r o le ve l is q uite p o p ula r in

oo ce

7n
t l in
the we s t b ut its a p p lic a tio n to I nd ia n d a ta , e s p e c ia lly in ind us tr ia l s e c to r is

/v
bu nv

e7
co
r a r e a nd the r e s e e ms to b e n o t a s ingle c o mp r e he ns ive s tud y d e a ling with

m
pe is

lu
vo
ge ne r a tio n fo r e c a s ts o f s ma ll s c a le
pa e ind us tr ia l s e c to r a t a ggr e ga te a nd

r
is tte

A/
th mi

d is a ggr e ga te le ve l. K e e p ing this fa c t into c o ns id e r a tio n p r e s e nt s tud y is a n

IM
ite m

e nd e a vo r in this d ir e c tio n. IB
t c Co

/C
ls
do rism

W e s t Be nga l o c c up ie s a p la c e o f p r id e in the ind us tr ia l ma p o f I nd ia

na
ur
se gia

whic h is a ttr ib uta b le to its s ma ll- s c a le ind us tr ia l s e c to r ( La l, 1 9 6 6 ) . The s ta te

n'

/jo
ea a

om

inhe r ite d a ve r y we a k ind us tr ia l b a s e whe n p a r titio ne d in 1 9 4 7 a nd s uffe r e d a

im at Pl Pl
.ib e: . c

.c
w c ry E

fur t he r e r o s io n whe n go t r e o r ga nize d in 1 9 6 6 ( S ingh 1 9 9 5 ) . M o r e r e c e ntly it

ng
w ur ia P
w o g e

hi
:// l s la R

ha s b e e n thr o ugh a p e r io d o f tur b ule nc e whic h no t o nly a ffe c te d the ind us tr ia l

lis
tp a s p he

ub

gr o wth a d ve r s e ly b ut te nd e d to c a us e s o me o ut - migr a tio n o f ind us tr y to o .

ht igin ve ! T

ap
or vol are

W ith the r e s to r a tio n o f p e a c e , th e s ta te go ve r nme nt tr ie d to a c tiva te the

in w

p r o c e s s o f ind us tr ia l d e ve lo p me nt with the ho p e to e nte r into a ne w e r a o f

Be

p r o gr e s s ( Bha tia , 1 9 9 9 ) .

Obje c t iv e s o f t he s t ud y

2
 P r e s e nt s tud y ha s b e e n c o nd uc te d k e e p ing in mind the fo llo wing o b je c tive s :

1 . To ge ne r a te fo r e c a s ts o f p r o d uc tio n, d ir e c t e mp lo yme nt, fixe d c a p ita l a nd

numb e r o f units o f s ma ll s c a le ind us tr ia l s e c to r o f W e s t Be nga l.

r
pe
pa
2 . To r e c o mme nd a p p r o p r ia te fo r e c a s ting mo d e l to p r e p a r e fo r e c a s ts o f s ma ll

is
s c a le ind us tr ia l s e c to r o f W e s t Be nga l.

he th

l.
tm
r t at
fo th

.h
11
k d
D a t a ba s e a nd Ana ly t ic a l Fra me wo rk :

oo ce

7n
t l in
P r e s e nt s tud y is b a s e d o n s e c o nd a r y d a ta fo r the p e r io d 1 9 7 0 - 7 1 to 2 0 0 6 - 0 7 .

/v
bu nv

e7
co
The a ggr e ga te d a ta r e la ting to the va r ia b le s : numb e r o f units , d ir e c t

m
pe is

lu
vo
e mp lo yme nt, fixe d c a p ita l a ndpa e p r o d uc tio n o f s ma ll- s c a le ma nufa c tur ing

r
is tte

A/
th mi

ind us tr y gr o up s o f W e s t Be nga l we r e c ulle d fr o m Dir e c to r a te o f I nd us tr ie s ,

IM
ite m

IB
W e s t Be nga l. The fo r e c a s ts o f the a b o ve me ntio ne d va r ia b le s fo r a le a d time
t c Co

/C
ls

o f 1 3 ye a r s we r e ge ne r a te d a p p lying o f ‘ Bo x- J e nk ins ’ ARI M A me tho d .

do rism

na
ur
se gia

The p r e s e nt paper is an e nd e a vo r to ge ne r a te fo r e c a s ts b y a p p lying

n'

/jo
ea a

om

s o p his tic a te d univa r ia te Bo x - J e nk ins ARI M A mo d e ling. Univa r ia te Bo x -

im at Pl Pl
.ib e: . c

.c
w c ry E

J e nk ins ( UBJ ) a p p r o a c h is b a s e d o n id e ntifying the p a tte r n fo llo we d b y p a s t

ng
w ur ia P
w o g e

hi
:// l s la R

va lue s o f a s ingle va r ia b le a nd the n e xtr a p o la ting the p a tte r n in the p a s t fo r

lis
tp a s p he

ub

ne a r futur e a s we ll ( P a nk r a tz, 1 9 8 3 ; M a k r id a k is 1 9 8 7 ) . O ne o f the a d va nta ge s

ht igin ve ! T

ap
or vol are

o f Bo x- J e nk ins o ve r o the r fo r e c a s ting mo d e ls is tha t this mo d e ling is no t

in w

b a s e d o n e c o no mic the o r y a nd c a p a b le o f c a p tur ing s lighte s t va r ia tio n in the

Be

d a ta ( M a k r id a k is , 1 9 7 8 ) . Bo x - J e nk ins me tho d o lo gy r e s ts o n the s imp lifying

a s s ump tio n tha t the p r o c e s s whic h ha s ge ne r a te d a s ingle time s e r ie s , is the

s ta tio na r y p r o c e s s b ut unfo r tuna te ly mo s t time s e r ie s e nc o unte r e d a r e r a r e ly

3
 s ta tio na r y, s till it is p o s s ib le to tr a ns fo r m the m to s ta tio na r y b y the

a p p r o p r ia te le ve l o f d iffe r e nc ing ( ma ximum up to s e c o nd le ve l) ( Bo x

&J e nk ins , 1 9 6 8 ; S P S S , 1 9 9 9 ) . The d e gr e e o f d iffe r e nc ing tr a ns fo r ms a no n -

r
pe
pa
s ta tio na r y s e r ie s into a s ta tio na r y o ne . I f no n - s ta tio na r y is a d d e d to a mixe d

is
ARI M A mo d e l, the n the ge ne r a l ARI M A ( p , d , q ) is o b ta ine d , it ha s the fo r m

he th

l.
tm
r t at
a s und e r :

fo th

.h
11
k d
oo ce
Φ P ( B ) ( 1 - B ) d Yt = C + θ q ( B ) e t

7n
t l in

/v
bu nv

e7
or

co

m
Φ P ( B ) Wt = C + θ q ( B ) e t

pe is

lu
… (1)

vo
pa e
r
is tte

A/
th mi

whic h will b e no n- s ta tio na r y unle s s d = 0 .

IM
ite m

IB
The mo d e l is s a id to b e o f the o r d e r ( p , d , q ) , whe r e p , d a nd q a r e us ua lly 0 ,
t c Co

/C
ls
do rism

1 o r 2 ( M a k r id a k is , 1 9 9 8 ; Ha nk e , 2 0 0 1 ) . Ha ving te nta tive ly id e ntifie d o ne o r

na
ur
se gia

mo r e mo d e ls tha t s e e m lik e ly to p r o vid e p a r s imo nio us a nd s ta tis tic a lly

n'

/jo
ea a

om

a d e q ua te r e p r e s e nta tio n o f a va ila b le d a ta , the ne xt s te p is to e s tima te the

im at Pl Pl
.ib e: . c

.c
w c ry E

va lue s o f the p a r a me te r s . S um o f s q ua r e s o f the r e s id ua ls we r e c o mp ute d b y

ng
w ur ia P
w o g e

hi
:// l s la R

us ing ma ximum lik e liho o d e s tima tio n me tho d give n the r e s p e c tive initia l
lis
tp a s p he

ub

e s tima te s o f the p a r a me te r s , o p timum va lue s o f the p a r a me te r s we r e s e a r c he d

ht igin ve ! T

ap
or vol are

b y imp r o ving the initia l e s tima te s ite r a tive ly b y s up p le me nting the m wi th the
in w

info r ma tio n c o nta ine d in the time s e r ie s . F o r a give n mo d e l invo lving k

Be

p a r a me te r s , the ite r a tive p r o c e d ur e wa s c o ntinue d till the d iffe r e nc e b e twe e n

s uc c e s s ive va lue s o f s um o f s q ua r e d r e s id ua l b e c a me s o s ma ll tha t c o uld b e

igno r e d fo r p r a c tic a l c o ns id e r a tio ns ( Bo x, J e nk ins a nd Re ins e ll, 1 9 9 4 , p . 2 2 5 ) .

4
 I n o r d e r to ma k e a n a s s e s s me nt o f the va lid ity o f the e s tima te d mo d e ls fo r the

give n time s e r ie s , fo llo wing d ia gno s tic me a s ur e s we r e wo r k e d o ut:

( a ) Aut o c o rre la t io ns o f re s idua ls : The a uto c o r r e la tio n c o e ffic ie nt wa s

r
pe
pa
wo r k e d o ut b y a p p lying fo r mula give n in the e q ua tio n ( 2 ) .

is
he th

l.
n- k

tm
r t at
∑ e t . e t +k

fo th

.h
t=1

11
k d
rk ( e ) = -----------------; k = 1,2,…ℓ …(2)

oo ce

7n
n

t l in
∑ et 2

/v
bu nv

e7
t=1

co

m
pe is

lu
vo
The ma jo r c o nc e r n o f AC F o f r e s id ua ls wa s tha t whe the r the r e s id ua ls we r e
pa e
r
is tte

A/
th mi

s ys te ma tic a lly d is tr ib ute d a c r o s s the s e r ie s o r the y c o nta in s o me s e r ia l

IM
ite m

IB
d e p e nd e nc y ( Box & Pierce, 1970). Ac c e p ta nc e o f the hyp o the s e s o f s e r ia l
t c Co

/C
ls
do rism

d e p e nd e nc y c o nc lud e s tha t the e s tima te d ARI M A mo d e l is ina d e q ua te .

na
ur
se gia
n'

/jo
ea a

om

( b) Po rt ma nt e a u Te s t : Ljung- Bo x Q s ta tis tic s wa s c o mp ute d fr o m the

im at Pl Pl
.ib e: . c

.c

mo d e l’ s r e s id ua ls b y us ing
w c ry E

ng
w ur ia P
w o g e

hi

ℓ
:// l s la R

lis

…( 3 )
Q = n ( n+ 2 ) ∑ r k ( e ) 2 ( n- k ) -1
tp a s p he

ub
ht igin ve ! T

ap
or vol are

N o n- s ignific a nc e o f p o r tma nte a u te s t wa s ta k e n to imp ly the ge ne r a te d

in w

r e s id ua ls c o uld b e c o ns id e r e d a white no is e , the r e b y ind ic a ting the a d e q ua c y

Be

o f e s tima te d mo d e l ( DeLurgio. 1998).

5
 ( c ) S um o f S qua re s o f Erro r ( S S E) : S um o f s q ua r e s o f the e r r o r s o f fitte d

mo d e ls wa s c o mp ute d . W e s e le c te d tha t mo d e l a d e q ua te , in c a s e o f whic h S S E

wa s minimu m.

r
pe
pa
( d) Ak a ik e I nf o rma t io n Crit e ria ( AI C) : AI C wa s c o mp ute d to d e te r mine

is
he th

l.
b o th ho w we ll the mo d e l fits the o b s e r ve d s e r ie s , a nd the numb e r o f

tm
r t at
fo th

.h
p a r a me te r us e d in the fit. W e c o mp a r e d the va lue AI C with o the r fitte d

11
k d
oo ce

7n
mo d e l to the s a me d a ta s e t a nd we s e le c te d tha t fitte d mo d e l a d e q ua te in c a s e

t l in

/v
bu nv

e7
o f whic h AI C wa s minimum. The AI C is c o mp ute d a s und e r :

co

m
… (4)

pe is
AI C = n lo g ( S S E) + 2 k

lu
vo
pa e
r
is tte
whe r e

A/
th mi

IM
k = N umb e r o f p a r a me te r s tha t a r e fitte d in the mo d e l
ite m

IB
t c Co

/C
lo g = N a tur a l lo ga r ithm
ls
do rism

na

n = numb e r o f o b s e r va tio ns in the s e r ie s

ur
se gia
n'

/jo

SSE = S um o f S q ua r e d Er r o r s
ea a

om
im at Pl Pl

W hile s e le c ting a d e q ua te mo d e l a d iffe r e nc e in AI C va lue o f 2 o r le s s

.ib e: . c

.c
w c ry E

ng
w ur ia P

wa s no t r e ga r d e d a s s ub s ta ntia l a nd we s e le c te d the s imp le mo d e l with le s s e r

w o g e

hi
:// l s la R

lis

p a r a me te r s .
tp a s p he

ub
ht igin ve ! T

ap

(e ) S c hwa rz B a y e s ia n I nf o rma t io n Crit e ria ( S B C) : S BC is a mo d ific a tio n

or vol are

to AI C ; it is b a s e d o n Ba ye s ia n c o ns id e r a tio n. Lik e AI C it wa s c o mp ute d to

in w
Be

d e te r mine ho w we ll the mo d e l fits a mo ngs t the c o mp e ting mo d e ls , a nd we

s e le c te d tha t mo d e l a d e q ua te in c a s e o f S BC wa s minimum. The S BC is a s

und e r :

S B C = n lo g ( S S E) + k lo g ( n) … (5)

6
 O n the b a s is o f a b o ve me ntio ne d ya r d s tic k , fina lly s e le c te d mo d e l fo r e a c h

va r ia b le wa s us e d fo r fo r e c a s ting a s d is c us s e d a s fo llo ws .

F o r ma k ing fo r e c a s ts e q ua tio n ( 2 ) wa s uns c r a mb le d to e xp r e s s Yt a nd e t b y

r
pe
us ing the r e la tio n W t = ( 1 - B) d Y t . Give n the d a ta up to time t the o p tima l

pa
is
Λ

he th

l.
tm
r t at
fo r e c a s ts o f Y t + ℓ [ d e s igna te d b y Y t ( ℓ ) ] ma d e a time t wa s ta k e n a s

fo th

.h
11
k d
c o nd itio na l e xp e c ta tio n o f Y t + ℓ , whe r e t, is the fo r e c a s t o r igin a nd ℓ is the

oo ce

7n
t l in
fo r e c a s t le a d - time . Er r o r te r m e t c o mp le te ly d is a p p e a r e d o nc e we ma d e

/v
bu nv

e7
co
fo r e c a s ts mo r e tha n q p e r io d a h e a d . Thus fo r ℓ > q , the n ℓ p e r io d a he a d

m
pe is

lu
vo
fo r e c a s t wa s ma d e a s und e r : pa e
r
is tte

A/
th mi

IM
^ ^ ^ ^ ^ ^
ite m

IB
Yt + ℓ = C + Φ 1 Yt +ℓ-1 + … + Φ p Yt +ℓ-p …(7)
t c Co

/C
ls
do rism

Table 1: Initial estimate of the Parameters

na
ur
se gia
n'

/jo
ea a

om
im at Pl Pl

ARIMA ARIMA
Variable (1,d,o) (0,d,1) ARIMA (1,d,1) ARIMA (2,d,2)
.ib e: . c

.c
w c ry E

MA MA AR MA MA
ng
w ur ia P

C AR1 C 1 C AR1 1 C 1 AR2 1 2

w o g e

hi
:// l s la R

- 0.06 - - - 0.35 0.29 - - 0.36 - 0.40

lis

No. of 25.3 124 25.4 0.05 24.9 500 087 22.6 0.41 162 0.56 080
tp a s p he

ub

units 9 4 4 749 64 6 5 176 74 5 961 8

ht igin ve ! T

ap

Direct - - - - - - - 1.13 -
or vol are

employm 114. 0.22 124. 0.22 120. 0.07 0.15 54.1 0.86 0.69 201 0.99
ent 502 072 478 027 728 906 054 442 729 468 9 517
in w
Be

Fixed - 8.88 0.33 11.2 0.59 0.99 - 0.56 - 0.99

Investme 8.52 0.17 019 259 131 604 361 11.2 0.43 913 0.00 208
nt 264 886 2 8 5 6 5 804 044 1 247 8
58.1 - 61.0 0.51 61.7 - - -
Productio 952 0.33 669 621 68.0 0.63 0.99 058 0.88 0.65 0.44 0.49
n 7 037 8 2 826 614 27 4 456 238 587 198

7
 ARIMA
Variable (0,d,2) ARIMA (1,d,2) ARIMA (2,d,o) ARIMA (2,d,1)
A
MA M R MA M AR AR AR M

r
pe
C 1 A2 C 1 1 A2 C 1 AR2 C 1 2 A1

pa
- - - - 0. - - - 0.0 0.1
No. of 24. 0.05 0.0 24. 25 0.19 0.0 24.6 0.0 0.03 24. 0.24 246 88

is
units 62 5 42 44 6 89 316 6 59 487 59 78 3 8

he th

l.
Direct - - - - - - - - - - - -

tm
r t at
employm 11 0.24 0.0 14 0. 0.63 0.2 129. 0.2 0.07 13 1.07 0.2 0.8

fo th

.h
ent 5.5 2 45 0.2 82 7 352 1 34 44 2.2 4 724 65

11
k d
Fixed 10. 0. - - 11. - 0.9

oo ce

7n
Investme 86 0.38 0.3 10. 72 1.12 0.1 9.01 0.2 31 0.61 0.0 97

t l in

/v
nt 7 87 37 87 1 09 21 58 19 -0.2 2 33 405 2

bu nv

e7
- - - - 60. - 0.2

co

m
Producti 61. 0.06 0.0 62. 0. 0.39 0.5 59.3 0.4 0.32 42 - 0.2 71

pe is

lu
on 66 45 65 02 81 6 269 13 46 87 5 0.21 522 9

vo
pa e
r
is tte

A/
th mi

IM
Note: In all Cases d=2
ite m

IB
t c Co

/C
ls
do rism

na

Table 2: Comparative Results from Various

Models
ur
se gia
n'

/jo
ea a

ARIM ARIM ARIM ARIM ARIM ARIM ARIM ARIM

om
im at Pl Pl

Estima A A A A A A A A
.ib e: . c

.c

Variable te (1,d,o) (0,d,1) (1,d,1) (2,d,2) (0,d,2) (1,d,2) (2,d,0) (2,d,1)

w c ry E

ng

Sum of
w ur ia P
w o g e

hi

No. of Square 1.66E+ 1.66E+ 1.65E+ 159315 165401 1.65E+ 1.65E+ 165364
:// l s la R

lis

units s 08 08 08 396 646 08 08 076.8

tp a s p he

ub

Standa -
ht igin ve ! T

rd 2274.7 310.05 2309.9 2317.4 2309.6 2347.2 2309.5 2347.5

ap

error 63 7 49 78 644 68 86 677

or vol are

624.10 624.11 626.15 629.03 626.14 628.24 626.14 628.25

in w

AIC 63 5 12 157 387 3 15 078

Be

627.15 627.16 630.73 636.66 630.72 634.34 630.72 634.35

SBC 9 77 03 337 293 85 05 622
Q 9.398 9.465 9.275 8.693 9.196 9.197 9.2 9.234
Direct Sum of
employ Square 1.57E+ 1.57E+ 1.57E+ 148726 1.569E 1.55E+ 1.57E+ 153576
ment s 09 09 09 0178 +09 09 09 1371
Standa 7009.6 7003.9 7112.9 6874.5 7108.4 7175.3 7102.0 7134.2
rd 98 58 73 335 871 3 94 047

8
 error
700.67 700.62 702.67 704.77 702.63 704.33 702.57 704.00
AIC 83 24 4 747 687 82 63 241
703.73 703.67 707.25 712.40 707.21 710.44 707.15 710.10
SBC 1 51 31 927 595 37 53 785

r
pe
Q 8.781 8.709 8.745 5.826 8.785 7.646 8.708 7.573

pa
Fixed Sum of
Investm Square 14326. 122744 122214 130387 125146 122374

is
ent s 48 139926 .8 .5 .34 .8 138538 .63

he th

l.
Standa

tm
r t at
rd 66.892 66.012 61.052 62.611 64.224 62.756 66.736 61.780

fo th

.h
error 99 39 2 696 265 14 94 526

11
k d
384.32 383.50 381.01 384.97 383.14 383.73 385.24 382.95

oo ce

7n
AIC 88 76 61 594 065 38 48 364

t l in

/v
387.38 386.56 385.59 392.60 387.71 389.83 389.82 389.05

bu nv

e7
SBC 16 04 52 775 973 93 39 908

co

m
Q 6.828 6.382 3.954 4.083 3.816 4.721 4.636 3.78

pe is

lu
Sum of

vo
Producti Square 28207
pa e
256031 272929 244828 255221 245385 249916 247551

r
is tte

A/
on s 09 5 1 6 5.4 4 0 3.7
th mi

IM
Standa
ite m

rd 296.39 281.57 288.52 286.96 285.68 283.00 282.48 285.64

IB
t c Co

error 17 4 02 581 924 97 36 443

/C
485.63 482.32 486.47 487.05 484.29 485.01 483.57 485.35
ls
do rism

AIC 12 77 85 498 146 75 3 054

na

488.68 485.38 491.05 494.68 488.87 491.12 488.15 491.45

ur
se gia
n'

SBC 39 04 76 678 054 3 21 599

/jo
ea a

Q 7.458 5.583 7.246 5.069 5.466 5.018 4.532 4.701

om
im at Pl Pl
.ib e: . c

.c
w c ry E

ng

Note: In all Cases d=2

w ur ia P
w o g e

hi
:// l s la R

lis

Table 3: Optimum Model for Forecasting

tp a s p he

ub
ht igin ve ! T

Optimum Iterat
ap

Variable Model C AR1 AR2 MA1 MA2 AIC SBC Q ions

or vol are

ARIMA(1, - 0.061 624.1 627.1 9.3

in w

No. of units d,0) 25.39 244 063 59 98 1

Be

Direct - - -
employmen ARIMA(2, 54.14 0.867 0.694 1.132 0.995 704.7 712.4 5.8
t d,2) 42 29 68 019 17 775 093 26 12
Fixed ARIMA(1, 11.21 0.596 0.993 381.0 385.5 3.5
Investment d,1) 315 046 615 161 952 94 10
ARIMA(0, 61.06 0.516 482.3 485.3 5.5
Production d,1) 698 212 277 804 83 3

9
 Note: In all Cases d=2

Table 4: Forecasts on the basis of Optimum Model

r
pe
Direct Fixed

pa
Year No. of units employment Investment Production
2007-08 206499.3423 961401.2809 6387.31395 32816.15406

is
2008-09 207261.0613 971969.6597 6761.29781 35065.83157

he th

l.
2009-10 207997.3964 982991.4036 7150.873 37376.57606

tm
r t at
2010-11 208708.3467 993409.3768 7554.27094 39748.38755

fo th

.h
2011-12 209393.9123 1002943.965 7970.43748 42181.26602

11
k d
2012-13 210054.0931 1012087.03 8398.74427 44675.21148

oo ce

7n
2013-14 210688.8891 1021459.398 8838.81681 47230.22393

t l in

/v
bu nv
2014-15 211298.3004 1031257.823 9290.43188 49846.30336

e7
2015-16 211882.3268 1041221.673 9753.45642 52523.44979

co

m
2016-17 212440.9686 1050988.224 10227.81112 55261.6632

pe is

lu
2017-18 212974.2255 1060423.946 10713.44872 58060.9436

vo
2018-19 213482.0977 1069665.002
pa e
11210.34103 60921.29098

r
is tte

A/
2019-20 213964.585 1078922.248 11718.47127 63842.70536
th mi

IM
CAGRs 0.3 0.96 5.18 5.68
ite m

IB
t c Co

/C
R ES ULTS AN D D I S CUS S I ON
ls
do rism

na

The r e s ults ha ve b e e n d is c us s e d in b r ie f und e r the fo llo wing s ub - he a d s :

ur
se gia
n'

/jo
ea a

S t a t io na rit y o f Time - S e rie s :

om
im at Pl Pl
.ib e: . c

.c

I n o r d e r to c o nfir m the me a n s ta tio na r ity a nd to c a lc ula te a p p r o p r ia te le ve l o f

w c ry E

ng
w ur ia P
w o g e

hi

d iffe r e nc ing, c o r r e lo gr a m a nd Ljung Bo x Q - s ta tis tic s we r e c o mp ute d fo r

:// l s la R

lis
tp a s p he

ub

o r igina l a nd a fte r d iffe r e nc ing o f d a ta up to s e c o nd le ve l ( figur e s a nd r e s ults

ht igin ve ! T

ap

fo r the o r igina l s e r ie s a r e no t s ho wn he r e fo r the c a us e o f s imp lic ity a nd

or vol are
in w

b r ie fne s s ) . All the e mp ir ic a l r e s ults c o nfir me d tha t a fte r the s e c o nd

Be

d iffe r e nc ing a ll the fo ur va r ia b le s a c hie ve d s ta tio na r ity ( d e ta ils a r e no t

d is c us s e d he r e ) .

M o de l I de nt if ic a t io n:

10
 I n this s te p a fte r c o mp a r ing S a mp le Auto c o r r e la tio n F unc tio ns a nd P a r tia l

Auto c o r r e la tio n func tio ns with t he ir the o r e tic a l c o unte r p a r ts , it wa s fo und

tha t the va lue o f AR a nd M A p r o c e s s d id no t e xc e e d e d the o r d e r 2 . I n o r d e r to

r
pe
pa
o ve r c o me the s ub je c tivity in s e le c tio n o f the a p p r o p r ia te o r d e r o f ARI M A

is
mo d e l in the p r e s e nt s tud y we ha ve c o ns id e r e d a l the p o s s ib le e ight

he th

l.
tm
r t at
c o mb ina tio ns o f ARI M A mo d e ls d e p e nd ing o n the va lue s o f p , d , q a s p a nd q

fo th

.h
11
k d
c a n ta k e a ny va lue o ut o f 0 , 1 , 2 . The p o s s ib le c o mb ina tio ns a r e : {( 1 , d , 0 ) ;

oo ce

7n
t l in
(2.d,0); (0,d,1); (1,d,1); (2,d,2); ( 0 , d , 2 ) ; ( 1 , d , 2 ) & ( 2 , d , 1 . ) } . He r e , fo r a ll

/v
bu nv

e7
co
the e ight mo d e ls t he va lue o f‘ d ’ a s a lr e a d y id e ntifie d 1 s 2 .

m
pe is

lu
vo
pa e
r
is tte

A/
th mi

Es t ima t io n o f dif f e re nt Orde re d AR I M A mo de ls :

IM
ite m

IB
As d is c us s e d e a r lie r , in o r d e r to ma k e c ho ic e fo r s uita b le fo r e c a s ting mo d e ls ,
t c Co

/C
ls
do rism

ARI M A p r o c e s s o f the o r d e r ( 1 , 2 , 0 ) , ( 2 . 2 , 0 ) , ( 0 , 2 , 1) , ( 1 , 2 , 1) , ( 2 , 2 , 2 ) , ( 0 , 2 , 2 ) ,
na
ur
se gia

( 1 , 2 , 2 ) , ( 2 , 2 , 1 ) we r e e s tima te d o n a ll the d a ta o f fo ur va r ia b le s . F o r
n'

/jo
ea a

om

e s tima ting p a r a me te r s o f s e le c te d mo d e ls , we ha ve s ta r te d with s o me initia l

im at Pl Pl
.ib e: . c

.c

va lue s o f C i Φ 1 , Φ 2 ,  1 θ 2 fo r d iffe r e nt o r d e r e d mo d e ls a s e xhib ite d in Ta b le 1 .

w c ry E

ng
w ur ia P
w o g e

hi
:// l s la R

I ns e r t Ta b le 1
lis
tp a s p he

ub

The n we mo d ifie d initia l va lue s b y s ma ll s te p s , while o b s e r ving s um o f

ht igin ve ! T

ap
or vol are

s q ua r e d r e s id ua l. W e ha ve s e le c te d tho s e va lue s o f p a r a me te r s a s the fina l

in w
Be

e s tima te s in c a s e o f whic h s um o f s q ua r e d r e s id ua ls w e r e le a s t . The e s tima te s

o f p a r a me te r s he r e us e d in the la s t s ta ge to c a lc u la te ne w va lue s ( fo r e c a s ts )

o f the s e r ie s . In the p r e s e nt e xe r c is e e s tima tio n wa s p e r fo r me d on

tr a ns fo r me d ( d iffe r e nc e d ) d a ta a nd b e fo r e ge ne r a ting fo r e c a s ts we ha ve

11
 inte gr a te d ( inve r s e o f d iffe r e nc ing) the s e r ie s to ma k e fo r e c a s ts c o mp a tib le

with the inp ut d a ta . Es tima tio n o f the M o d e ls ’ p a r a me te r s wa s c a r r ie d o ut

thr o ugh ma ximum lik e liho o d me tho d ( Bo x, J e nk ins a nd Re ins e ll, 1 9 9 4 , p .

r
pe
pa
225).

is
D ia g no s t ic t e s t ing o f dif f e re nt AR I M A mo de ls :

he th

l.
tm
r t at
I n this s ta ge s e le c tio n o f b e s t fitte d mo d e ls a nd its a d e q ua c y wa s c he c k e d o n

fo th

.h
11
k d
the b a s is o f va r io us c r ite r ia a s me ntio ne d e a r lie r in e q ua tio ns 2 to 5 . As p e r

oo ce

7n
t l in
the a b o ve me ntio ne d me a s ur e s , a mo d e l is c o ns id e r e d b e s t fo r ne xt s ta ge i. e .

/v
bu nv

e7
co
fo r e c a s ting if it p o s s e s s e s minimum s um o f s q ua r e s o f r e s id ua ls , minimum

m
pe is

lu
vo
va lue o f s ta nd a r d e r r o r , minimum AI C va lue , minimum va lue o f S BC , a nd
pa e
r
is tte

A/
th mi

minimum va lue o f no n- s ignific a nt Bo x- Ljung Q s ta tis tic s . Alte r na tive mo d e ls

IM
ite m

IB
fo r e a c h va r ia b le we r e e xa mine d c o mp a r ing the va lue s o f the s e p a r a me te r s .
t c Co

/C
ls
do rism

O nly tha t mo d e l in c a s e o f e a c h va r ia b le ha s b e e n s e l e c te d whic h s a tis fie d

na
ur
se gia

ma ximum numb e r o f a b o ve me ntio ne d c r ite r io n.

n'

/jo
ea a

om

Va lue s o f the a b o ve me ntio ne d c r ite r io n ( e xc e p t c o r r e lo gr a m o f r e s id ua ls )

im at Pl Pl
.ib e: . c

.c
w c ry E

c o mp ute d fr o m the d iffe r e nt o r d e r e d ARI M A mo d e ls fo r e a c h va r ia b le ha ve

ng
w ur ia P
w o g e

hi
:// l s la R

b e e n p r e s e nte d in Ta b le 2 . Almo s t in a ll th e c a s e s fo r d iffe r e nt o r d e r ARI M A

lis
tp a s p he

ub

mo d e ls , c o r r e lo gr a m o f r e s id ua ls s ho we d no s e r ia l d e p e nd e nc y ( C o r r e lo gr a m
ht igin ve ! T

ap
or vol are

fo r r e s id ua ls a r e no t s ho wn he r e a s the numb e r o f figur e s w e r e la r ge ) .

in w

I ns e rt Ta ble 2
Be

Ta b le 2 d e p ic ts the va lue s o f a ll the p a r a me te r s in c a s e o f a l l the fo ur

va r ia b le s . Exa mina tio n o f Ta b le 2 ha s r e ve a le d tha t in c a s e o f numb e r o f

units , AI C a nd S BC we r e minimum i. e . 6 2 4 . 1 0 6 2 8 a nd 6 2 7 . 1 5 9 r e s p e c tive ly

12
 fo r the mo d e l ( 1 , 2 , 0 ) . S um o f s q ua r e o f e r r o r s wa s o b s e r ve d lo we s t fo r the

mo d e l ( 1 , 2 , 2 ) to the tune o f 1 6 5 3 2 6 8 9 7 . 2 , while lo we s t va lue ( 8 . 6 9 3 ) o f Q -

s ta tis tic s wa s fo und fo r the mo d e l o f the o r d e r ( 2 , 2 , 2 ) . W hile lo we s t s ta nd a r d

r
pe
pa
e r r o r wa s o b s e r ve d a s 2 2 7 5 . 0 6 8 in c a s e o f the mo d e l ( 0 , 2 , 1 ) . F ur the r p e r us a l

is
o f Ta b le 2 s ho ws tha t AI C ( 7 0 0 . 6 2 2 3 5 ) a nd S B C ( 7 0 3 . 6 7 5 0 7 we r e le a s t in

he th

l.
tm
r t at
c a s e o f the mo d e l ( 0 , 2 , 1 ) while s um o f s q ua r e o f e r r o r s ( 1 9 8 7 2 6 0 1 7 7 . 9 ) ,

fo th

.h
11
k d
s ta nd a r d e r r o r ( 6 8 7 4 . 5 3 3 5 ) a s we ll a s Q - s ta tis tic s ( 5 . 8 2 6 ) o b s e r ve d minimum

oo ce

7n
t l in
fo r the mo d e l ( 2 , 2 , 2 ) . F ur the r gla nc e a t Ta b le 2 e xhib ite d tha t s um o f s q ua r e

/v
bu nv

e7
co
o f e r r o r s ( 1 2 2 2 1 4 . 5 0 ) a nd Q - s ta tis tic s ( 3 . 8 7 0 ) we r e minimum fo r the mo d e ls

m
pe is

lu
vo
( 2 , 2 , 2 ) a nd ( 2 , 2 , 1 ) r e s p e c tive ly in c a s e o f the va r ia b le fixe d c a p ita l
pa e
r
is tte

A/
th mi

inve s tme nt. W he r e a s , s ta nd a r d e r r o r ( 6 1 . 0 5 2 1 9 5 ) , AI C ( 3 8 1 . 0 1 6 0 8 ) a nd S BC

IM
ite m

IB
( 3 8 5 . 5 9 5 1 6 ) we r e o b s e r ve d minimum fo r the mo d e l ( 1 , 2 , 1 ) . A c lo s e
t c Co

/C
ls
do rism

e xa mina tio n o f Ta b le 2 ha s r e ve a le d tha t in c a s e o f the p r o d uc tio n, the

na
ur
se gia

s ta nd a r d e r r o r ( 2 8 1 . 5 7 3 9 7 ) , AI C ( 4 8 2 . 3 2 7 6 9 ) a nd S BC ( 4 8 5 . 3 8 0 4 1 ) we r e
n'

/jo
ea a

om

minimum fo r the mo d e l ( 0 , 2 , 1 ) , while in c a s e o f Q - s ta tis tic s minimum va lue

im at Pl Pl
.ib e: . c

.c
w c ry E

o f 4 . 5 3 2 wa s o b s e r ve d in c a s e o f mo d e l o f the o r d e r ( 2 , 2 , 0 ) a s c o mp a r e d to
ng
w ur ia P
w o g e

hi
:// l s la R

o the r c o mp e ting mo d e ls , whe r e a s le a s t s um o f s q ua r e o f e r r o r s wa s d e te c te d

lis
tp a s p he

ub

minimu m i. e . 2 4 4 8 2 8 6 . 0 fo r the mo d e l ( 2 , 2 , 2 ) .
ht igin ve ! T

ap
or vol are

The o p timum mo d e ls ( b a s e d o n s a tis fa c tio n o f ma ximum n umb e r o f c r it e r io n

in w

b y a p a r tic ula r mo d e l) ha ve b e e n e xp r e s s e d in Ta b le 3 . P e r us a l o f Ta b le 3
Be

r e ve a le d tha t the mo d e ls ( 1 , 2 , 0 ) , ( 2 , 2 , 2 ) , ( 1 , 2 , 1) , a nd ( 0 , 2 , 1 ) we r e o p timum in

c a s e o f the va r ia b le s : numb e r o f units , d ir e c t e mp lo yme nt, fixe d c a p ita l

inve s tme nt a nd p r o d uc tio n r e s p e c tive ly.

13
 I ns e rt Ta ble 3

Fo re c a s t s :

Afte r e xtr a c ting the o p timum mo d e ls fo r ge ne r a tio n o f fo r e c a s ts , the ne xt s te p

r
pe
pa
is to p r e p a r e fo r e c a s ts o f numb e r o f units , e mp lo yme nt, c a p ita l inve s tme nt

is
a nd p r o d uc tio n o f s ma ll s c a le ind us tr ia l s e c to r o f W e s t Be nga l. Ta b le 4

he th

l.
tm
r t at
highlights fo r e c a s ts of numb e r of units , e mp lo yme nt, fixe d c a p ita l,

fo th

.h
11
k d
inve s tme nt a nd p r o d uc tio n fo r le a d time o f 1 3 ye a r s b a s e d o n o p tima l mo d e ls .

oo ce

7n
t l in
I ns e rt Ta ble 4

/v
bu nv

e7
co
P e r us a l o f Ta b le 4 r e ve a le d tha t in the ye a r 2 0 0 7 - 0 8 , the p r e d ic t e d numb e r s

m
pe is

lu
vo
o f units a r e 2 0 5 7 1 2 , e xp e c te d to r is e to 2 0 7 2 6 1 in 2 0 0 9 - 1 0 a nd to 2 1 1 8 8 2 in
pa e
r
is tte

A/
th mi

2 0 1 5 - 1 6 a nd fina lly e xp e c te d to b e 2 1 3 9 6 4 b y the ye a r 2 0 1 9 - 2 0 . Exa mina tio n

IM
ite m

IB
o f Ta b le 4 d e p ic ts tha t the fo r e c a s ts fo r the d ir e c t e mp lo yme nt in s ma ll s c a le
t c Co

/C
ls
do rism

ind us tr ia l s e c to r o f W e s t Be nga l a r e 9 6 1 4 0 1 in 2 0 0 7 - 0 8 a nd 9 8 2 9 9 1 in 2 0 0 9 -
na
ur
se gia

1 0 a nd fur the r e xp e c te d to inc r e a s e to 1 0 1 2 0 8 7 in 2 0 1 2 - 1 3 a nd wo uld

n'

/jo
ea a

om

p r o b a b ly gr o w to 1 0 7 8 9 2 2 in 2 0 1 9 - 2 0 . F ur the r e xa mina tio n o f Ta b le 4 s ho ws

im at Pl Pl
.ib e: . c

.c
w c ry E

tha t fixe d c a p ita l inve s tme nt wa s e xp e c te d to b e 6 7 3 8 7 . 3 2 Rs . C r o r e in t he

ng
w ur ia P
w o g e

hi
:// l s la R

ye a r 2 0 0 7 - 0 8 , wo uld p r o b a b ly r is e to 7 9 7 0 . 4 3 Rs . C r o r e in 2 0 1 1 - 1 2 a nd the n
lis
tp a s p he

ub

to 1 0 7 1 3 . 4 4 Rs . C r o r e in 2 0 1 7 - 1 8 a nd fina lly e xp e c te d to e xp a nd to 1 1 7 1 8 . 4 7
ht igin ve ! T

ap
or vol are

Rs . C r o r e in 2 0 1 9 - 2 0 . Ta b le 4 a ls o r e ve a le d tha t p r o d uc tio n is a ntic ip a te d to

in w

e xp a nd fr o m 3 2 8 1 6 . 1 5 Rs . C r o r e in 2 0 0 7 - 0 8 to 3 5 0 6 5 . 8 3 Rs . C r o r e in 2 0 0 8 -
Be

09. I t is fur the r a ntic ip a te d tha t the p r o d uc tio n figur e wo uld gr o w to

5 2 5 2 3 . 4 4 Rs . C r o r e in 2 0 1 5 - 1 6 a nd the n to 6 3 8 4 2 . 7 0 Rs . C r o r e till 2 0 1 9 - 2 0 .

As fa r gr o wth o f numb e r o f units is c o nc e r ne d , the y a r e e xp e c te d to gr o w a t

14
 c o mp o und a nnua l r a te o f 0 . 3 0 while e mp lo yme nt, inve s tme nt a nd p r o d uc tio n

wo uld p r o b a b ly gr o w a t the r a te o f 0 . 9 6 , 5 . 1 8 a nd 5 . 6 8 p e r c e nt r e s p e c tive ly.

This c le a r ly ind ic a te s tha t in the c o ming d a ys no t o nly p r o d uc tivity o f c a p ita l

r
pe
pa
b ut c a p ita l inte ns ity will a ls o inc r e a s e . But the me a ge r r a te o f gr o wth o f

is
e mp lo yme nt c o nfir ms tha t in s ub s e q ue nt ye a r s the r e is le s s s c o p e o f la b o ur

he th

l.
tm
r t at
a b s o r p tio n in the S ma ll S c a le I nd us tr ia l o f W e s t Be nga l.

fo th

.h
11
k d
oo ce

7n
t l in
Co nc luding R e ma rk s :

/v
bu nv

e7
co
N o d o ub t, W e s t Be nga l is b a s ic a lly a n a gr ic ultur a l s ta te b ut it ha s ma d e

m
pe is

lu
vo
ho ne s t e ffo r ts to p r o vid e imp e tus to the ind us tr ia l s e c to r e s p e c ia lly s ma ll
pa e
r
is tte

A/
th mi

s c a le ind us tr ia l s e c to r ( Gup ta , 2 0 0 6 ) . The Auto Re gr e s s ive I nte gr a te d

IM
ite m

IB
M o ving Ave r a ge ( ARI M A) mo d e l thr o ugh Bo x - J e nk ins a p p r o a c h ha s b e e n
t c Co

/C
ls
do rism

us e d to ge ne r a te fo r e c a s ts r e ga r d ing va r ia b le s o f s ma ll s c a le ind us tr ia l
na
ur
se gia

s e c to r o f W e s t Be nga l. I t is e xp e c te d tha t numb e r o f units a nd e mp lo yme nt

n'

/jo
ea a

om

wo uld p r o b a b ly gr o w a t a s lo we r p a c e a s c o mp a r e d to inve s tme nt a nd

im at Pl Pl
.ib e: . c

.c
w c ry E

p r o d uc tio n. The fo r e c a s ts ha ve d e p ic te d a b r ight p ic t ur e a he a d b ut with lo w

ng
w ur ia P
w o g e

hi
:// l s la R

s c o p e o f e mp lo yme nt o p p o r tunitie s fo r la b o ur e r s . The s e fo r e c a s ts c a n

lis
tp a s p he

ub

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