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Examining the Eco-Macroeconomic Performance Index of India: A Data Envelopment Analysis Approach

Ranjan Kumar Mohanty () and Biresh Sahoo ()
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Ranjan Kumar Mohanty: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: The prime objective of the paper is to construct a robust macroeconomic performance (MEP) index of India using Data Envelopment Analysis (DEA) approach. Six major macro indicators, namely, economic growth, employment rate, terms of trade, inflation rate, fiscal deficit, and pollution are used to computeMEP and Eco-MEP index of the Indian economy from 1980-81 to 2015-16. Overall, both the MEP and Eco-MEP index scores have quite similar best performing years, worst performing years, and have also captured the major events that adversely affected the economy during the last 35 years. This shows that the trend in overall performance of Indian economy was better in the 1980s and the 1990s but has deteriorated after the 2000s. The ARDL Bounds Testing approaches to cointegration methods are used to test the robustness/utility of these indices. The estimated results find that MEP and Eco-MEP have a positive impact on private investment, negative effect on current account deficit (CAD), and positive impact on foreign investment inflows (FIIs) and foreign direct investment (FDI). Hence, the suggested composite MEP index is stable, robust and truly captures the economic performance of India.

Keywords: Macroeconomic performance; Eco-macroeconomic performance; Data Envelopment Analysis; Autoregressive Distributed Lag (ARDL); India. (search for similar items in EconPapers)
JEL-codes: E60 C14 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-env and nep-mac
Date: 2017-07
Note: Working Paper 202, 2017
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