AN EMPIRICAL STUDY ON

INDIAN GDP EFFECTED BY

IMPORT, EXPORT&
FDI (1980-2020)

PRESENTED BY
SUBINAY BISWAS (21350059)
WAJAHAT HUSSAIN
INTRODUCTION
India's rise is even more dramatic across the past 40 years.
Since 1980, the country's nominal GDP has jumped more than
700%. Despite its strong economic growth, the country still faces
its share of challenges.

 Exports of goods and services represent the value of all goods

and other market services provided to the rest of the world. India
exports for 2020 was $474.15B, a 10.37% decline from
2019.India exports for 2019 was $529.02B, a 1.79%
decline from 2018.

Imports of goods and services represent the value of all goods

and other market services received from the rest of the world.
India imports for 2020 was $482.45B, a 19.8% decline from
2019.India imports for 2019 was $601.58B, a 5.86%
OBJECTIVE===
Base on the above research question, the following
research objectives were also designed ;

1. To determine the relationships between Export,

Import Foreign Direct Investment(FDI) and GDP.

2. To determine whether the relationships are long run

or short run phenomena, or both.

3. To determine whether there is any causal between

Export, Import, FDI and GDP.

4. To determine the directions of the causality.

RESEARCH QUESTION

1. Whether Export, Import FDI and GDP are co-

integrated?

2. Whether their relationships are long run or

short run phenomenon?

3. Are there any causal relationships between

Export, Import FDI and GDP?

4. What is the direction of the causality? (If any)

SET HYPOTHESIS FACTORS
DETERMINE
1)Ho= Export doesn’t influence
GDP. GDP
H1= Export does influence GDP.  Export
2) Ho= Import doesn't influence  Import
GDP.  Foreign Direct Investment
H1=Import does influence GDP.
3) H0=FDI doesn’t influence
GDP.
H1=FDI does influence GDP.
MODEL SPECIFICATION
• GDPt = β1 + β2 IMP + β3 EXP +β4FDI+ ut
• β1 (intercept)
• β2, β3 and β4 are slope coefficient.
• IMP(import)
• EXP(export)
• FDI(foreign direct investment)
• Ut(error term)
. summerize GDPUSB INDIASEXPORTUSB INDIASIMPORTUSB FDIUSB
unrecognized command: summerize
r(199);

. summarize GDPUSB INDIASEXPORTUSB INDIASIMPORTUSB FDIUSB

Variable Obs Mean Std. Dev. Min Max

GDPUSB 41 943.1615 858.4067 186.33 2870.5

INDIASEXPO~B 41 175.4185 191.9566 11.44 538.64
INDIASIMPO~B 41 203.1485 223.0731 16.34 639.01
FDIUSB 41 14.87707 18.9489 .01 67.5

. regress GDPUSB INDIASEXPORTUSB, INDIASIMPORTUSB FDIUSB

option INDIASIMPORTUSB not allowed
r(198);

. regress GDPUSB INDIASEXPORTUSB INDIASIMPORTUSB FDIUSB

Source SS df MS Number of obs = 41

F( 3, 37) = 586.99
Model 28867937 3 9622645.65 Prob > F = 0.0000
Residual 606545.956 37 16393.1339 R-squared = 0.9794
Adj R-squared = 0.9778
Total 29474482.9 40 736862.073 Root MSE = 128.04

GDPUSB Coef. Std. Err. t P>|t| [95% Conf. Interval]

INDIASEXPO~B 8.211223 1.544981 5.31 0.000 5.080794 11.34165

INDIASIMPO~B -3.745592 1.206514 -3.10 0.004 -6.190221 -1.300963
FDIUSB 5.722457 3.219323 1.78 0.084 -.8005105 12.24542
_cons 178.5388 27.54155 6.48 0.000 122.7344 234.3433
. hettest

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of GDPUSB

chi2(1) = 39.10
Prob > chi2 = 0.0000

. vif

Variable VIF 1/VIF

INDIASEXPO~B 214.61 0.004660

INDIASIMPO~B 176.75 0.005658
FDIUSB 9.08 0.110130

Mean VIF 133.48

. regress INDIASIMPORTUSB FDIUSB

Source SS df MS Number of obs = 41

F( 1, 39) = 204.68
Model 1671901.02 1 1671901.02 Prob > F = 0.0000
Residual 318563.712 39 8168.3003 R-squared = 0.8400
Adj R-squared = 0.8359
Total 1990464.73 40 49761.6182 Root MSE = 90.379

INDIASIMPO~B Coef. Std. Err. t P>|t| [95% Conf. Interval]

FDIUSB 10.78925 .7541399 14.31 0.000 9.263861 12.31464

_cons 42.63603 18.03058 2.36 0.023 6.16575 79.10631

. vif

Variable VIF 1/VIF

FDIUSB 1.00 1.000000

Mean VIF 1.00

. tsset YEAR, yearly
time variable: YEAR, 1980 to 2020
delta: 1 year

. regress GDPUSB INDIASEXPORTUSB INDIASIMPORTUSB FDIUSB

Source SS df MS Number of obs = 41

F( 3, 37) = 586.99
Model 28867937 3 9622645.65 Prob > F = 0.0000
Residual 606545.956 37 16393.1339 R-squared = 0.9794
Adj R-squared = 0.9778
Total 29474482.9 40 736862.073 Root MSE = 128.04

GDPUSB Coef. Std. Err. t P>|t| [95% Conf. Interval]

INDIASEXPO~B 8.211223 1.544981 5.31 0.000 5.080794 11.34165

INDIASIMPO~B -3.745592 1.206514 -3.10 0.004 -6.190221 -1.300963
FDIUSB 5.722457 3.219323 1.78 0.084 -.8005105 12.24542
_cons 178.5388 27.54155 6.48 0.000 122.7344 234.3433

. dwstat

Durbin-Watson d-statistic( 4, 41) = .9854139

. bgodfrey

Breusch-Godfrey LM test for autocorrelation

lags(p) chi2 df Prob > chi2

1 11.735 1 0.0006

H0: no serial correlation

. estat bgodfrey, lags(2) small

Breusch-Godfrey LM test for autocorrelation

lags(p) F df Prob > F

2 6.271 ( 2, 35 ) 0.0047

H0: no serial correlation

CONCLUSION
The purpose of this study is to test the applicability of
Export Led Growth Hypothesis (ELG) Foreign Direct
Investment with respect to India(FDI) during the period
of 1980-2020. The variables used represent the
economic growth and international trade. The problem
of Autocorrelation tested by Durbin Watson d-test and
the Breusch-Godfrey Test and. By using VIF test
problem of Multicollinearity. The policy implication of
the positive association between exports, imports and
FDI and economic growth reveals that economic reform
policies and the shift towards a free market helped the
economy to reallocate its resources to productive uses.