The Effect of Macro-Economic Factors on Total Automobile Production in India

  • Sumant Sharma


The research paper evaluates  effects of macroeconomic variables on the total production of automobiles(commercial, passenger and two/three wheelers ). The automobile industry has been experiencing a slowdown like many other sectors. The situation has been compounded by economic slump and increase in cost of owning a vehicle in India. The implications of the Supreme Court’s ruling which calls for implementation of BS-VI norms to be effective from April 1, 2020 would add a new dimension to situation of automobile production.

 The slowdown in the automobile sector has indeed been a concern for the Indian Government which aspires to reach the five trillion economy target by 2024-2025.The research paper reflects on the effects of numerous macro-economic factors and their corresponding effect on the total automobile production that encompasses  production of passenger vehicles, commercial vehicles as well as two & three wheelers).The macro-economic factors whose effect is to be evaluated are: Investments by foreign institutional investors, index of consumer sentiment(indicates how optimistic consumers feel about the state of the economy), fiscal deficit (total exports-total imports),money supply, IIP(Index of Industrial Production),Gold Prices, WPI(Wholesale price index, may be considered  a proxy for inflation of goods) and exchange rate. The macro-economic factors are independent variables(x1,x2,x3…) and the total automobile production(indicative of demand) is the dependent variable(y).

In total 43 datapoints have been taken for the analysis with monthly frequency from Jan 2016-July 2019. Multiple Linear Regression Analysis using multiple comprising of t-test, f test, coefficient of correlation ->R^2, auto-collinearity using serial correlation LM test, heteroscedasticity, multicollinearity ,stability and normalcy of error term(JB test) would be carried out on E-views software. The analysis will help pin-point the key/significant variables affecting total automobile production. The research findings will be beneficial for directing government efforts in the right direction which can accentuate revival of automobile sector to ensure that the prospective workers in the this sector do not experience the same challenges. The results will also clear misconceptions regarding the factors that are believed to have an effect and the ones that actually affect the production of automobiles in India

How to Cite
Sumant Sharma. (2020). The Effect of Macro-Economic Factors on Total Automobile Production in India. International Journal of Advanced Science and Technology, 29(6s), 3572 -. Retrieved from