ANALYSING THE RELATIONSHIP BETWEEN BALANCE OF PAYMENTS DYNAMICS AND GDP GROWTH IN INDIA: A COMPREHENSIVE STUDY
Abstract
This comprehensive study investigates the intricate relationship between balance of payments (BoP) dynamics and Gross Domestic Product (GDP) growth in India, aiming to elucidate their impacts and predictive capabilities. Analyzing data spanning from the 2nd Quarter of 2011 to the 3rd Quarter of 2023, collected from the Reserve Bank of India's statistical handbook, the study employs an analytical research design to explore the interplay between BoP dynamics and GDP growth. Descriptive statistics reveal notable variability in net BoP transfers and GDP values, with skewness and kurtosis measures indicating distinct distributional characteristics. Correlation analysis establishes a moderately strong positive correlation (Pearson correlation coefficient = 0.718) between net BoP transfers and GDP, underscoring their tendency to move together. This correlation is statistically significant at the 0.01 level, validating its reliability for predictive purposes. Further regression analysis identifies the exponential regression model as the most suitable for forecasting, with an impressive coefficient of determination (R Square = 0.690), explaining approximately 69% of the variance in net BoP transfers. The exponential model, adept at capturing nonlinear relationships, provides a robust framework for forecasting BoP transfers based on GDP at market prices constant. The study's findings offer valuable insights for policymakers and stakeholders, facilitating informed decision-making in navigating the complexities of the Indian economy.