Study on Macro Economic Variables

The present paper refers to current deficit that means a difference between import and export of goods and services. In developing countries a rising import of services is justified on the basis of the economic development targets to be achieved. India has been experiencing budget deficit problem for the last many years. For example in March 2011, budget deficit was 940 crores which was approx 10 times of that in March 2008. Generation of additional revenue was restricted mainly because of the weaker economic activity for the last many years. Because of the serious debt problems, India has witnessed deterioration in investment rate, economic growth, and the rise in the incidence of poverty. Looking at the grim situation of the fiscal imbalance the question arises what are the likely factors contributing towards the deficit in India? The major objective of this project is to study macroeconomic variables (such as Current Deficit, Exchange Rate, IIP, CPI, Money Supply, BSE Sensex, WPI) and to find out how these variables interact with each other. To help establishing a relation between above macroeconomic variables. The first phase of the project giving emphasis on finding causality of above macro economic variables using Granger Causality test. The second phase of the project (Model Building) deals with determining regression models which can explain the relationship established between above macro economic variables. The third phase of the project deals with finding coefficients of each independent variable (of the models build in phase two), their relevance, checking how well the given variables are explaining the data using a statistical package called SPSS and if the models build above are significant or not