Fluctuations in India's GDP and Manufacturing Output: An Analytical Approach

Abstract

In India, the manufacturing sector has been a vital engine in driving economic growth, significantly contributing to employment and industrial development. This sector includes diverse activities such as production of consumer goods, heavy machinery, automobiles, textiles, and technology products. However, various factors—including changes in government policies, global trade dynamics, supply chain disruptions, and shifts in domestic demand—have contributed to periodic fluctuations within the sector, impacting overall economic stability. This study investigates the long-term linear growth and fluctuations around that trend for India's GDP and manufacturing output over a 50-year period, from 1970-71 to 2019-20. For measuring overall fluctuations around the trend, the existing literature supports the RSS-based measure and the Cuddy and Della Valle (1978) method (CDVI). The RSS-based method and the Coppock-based method are not directly comparable. After certain adjustments, the adjusted Coppock method becomes comparable to the RSS-based method. Based on both year-to-year fluctuations and overall fluctuations, we have calculated the approximate length of the full business cycle of a data set. The findings aim to shed light on the stability and growth patterns in manufacturing, providing insights into policy impacts and sectoral resilience amid economic cycles. The findings reveal an average annual growth rate of 5.52% for GDP and 6.08% for the manufacturing sector. The year-to-year fluctuation, using the adjusted Coppock index, is found to be 0.00089 for GDP and 0.00151 for the manufacturing sector GDP. Additionally, the overall fluctuation around the linear trend, calculated using the RSS-based approach, is 0.00520 for GDP and 0.00651 for manufacturing sector output.