A CRITICAL ANALYSIS ON GROSS

DOMESTIC PRODUCT RATES OF

INDIA

Rajneesh Karloopia
Department of Management

1. Introduction
In the case, GDP of India is under study in respect of years. Gross Domestic Product (GDP) is
the market value of all official recognized final goods and services produced within the country
in a year or other given period of time.

GROSS PERSONAL
CONSUMPTION FIXED NON
DOMESTIC EXPENDITURES (C) INVESTMENT
RESIDENTIAL
PRODUCT INVENTORIES
INVESTMENT (I)
(GDP) RESIDENTIAL

GOVERNMENT (G) EXPORT

NET EXPORT (NX) IMPORT

GDP = C + I + G + NX

GDP per capita is often considered as indicator of a country’s standard of living. GDP per capita
is not the measure of personal income. GDP per capita exactly equals the gross domestic income
per capita. To calculate the GDP per capita the formula which use is total GDP is divided by the
number of resident population on given date. This case study is trying to find out relation
between Year & GDP of the country to find out instantaneous and compound growth rates.
 2. Research Methodology
The regressed variable is GDP of India, and the regressor is the yearly time series from 1989-
2018. In order to find out the instantaneous growth rate and compound rate of GDP of India the
following liner regression model is used with Dummy Variables.

The very simple growth rate formula is for the study is as follows

Yt = Y0(1+r)t

Taking log natural on both side.

lnYt = lnY0 + ln(1+r)t
we can write the above formula as
lnYt =β1 + β2t+ Ui
Where,
β1 is the intercept.
β2 is the instantaneous growth rate and also the coefficient .
Ui is the error term.

In order to compute the compound growth rate the following formula is used,
β2 = ln(1+r)
or (1+r) = e β2 therefore r = e β2 _1

3. Data
Index of GDP of India from 1989 – 2018(30 years)

S.NO YEAR GDP IN %

1 1989 5.9
2 1990 5.5
3 1991 1.1
4 1992 5.5
5 1993 4.8
6 1994 6.7
7 1995 7.6
8 1996 7.5
9 1997 4
10 1998 6.2
11 1999 8.8
12 2000 3.8
13 2001 4.8
14 2002 3.8
15 2003 7.9
16 2004 7.9
17 2005 9.3
18 2006 9.3
 19 2007 9.8
20 2008 3.9
21 2009 8.5
22 2010 10.3
23 2011 6.6
24 2012 5.5
25 2013 6.4
26 2014 7.4
27 2015 8
28 2016 8.2
29 2017 7.2
30 2018 7.1

Source: http://data.worldbank.org/indicator/

4. Empirics
The results based on regression on the above-mentioned data are as follows:
lnYt = 1.419+ 0.021t

s eror= 0.203 0.014

t = 7.361 1.494
sig = .000 0.149 R2 = 0.092

lnY0= β1 = 1.419
ln(1+r) = β2= 0.021 or (1+r) = e0.21 = 1.02
Therefore r = 0.02
 5. Conclusion
From the result, we can infer the yearly instantaneous growth rate of GDP of India is 0.021 and
the compound growth rate is 0.2%. The relationship between Year and GDP is insignificant at
1% and 5%.