Author(s): Sasmita Nayak, Tania Dehury, Rashi Taggar and Pabitra Kumar Jena
This paper explores how the various macroeconomic determinants impact the Indian economy's GDP. The data has been collected from World Development Indicator (WDI) during the years 1982-2016. The variables included in the study are Gross Domestic Product (GDP), Rate of Interest (ROI), Inflation Rate (INF), Trade Openness (TO), Foreign Direct Investment (FDI) and Gross Capital Formation (GCF). The ordinary Least Square (OLS) method has been used to see the impact of macroeconomic variables on GDP. The regression results revealed a positive association between Foreign Direct Investment , Gross Capital Formation , Trade Openess and Gross Domestic Product, whereas there is a negative relationship between Inflation and Gross Domestic Product. The Granger causality test is also used here in the study to determine the causality between the variables in a model. The study reveals that Granger causality results indicate FDI does not Granger cause GDP, but GDP Granger causes FDI. Finally, the results show FDI Granger caused the interest rate as well as the trade openness of the Indian economy.