On the Dynamics of Indian GDP, Crude Oil Production and Imports

This study investigates the static and dynamic causal relationship among income, crude oil production and imports for the Indian economy. The static-short-run Granger causality shows that income and crude oil imports Granger-cause domestic crude oil production. This implies that gross domestic product (GDP) and oil imports contain important information in predicting the production of crude oil not the vice versa. The error correction value −0.415 implies that disequilibrium in GDP will get corrected in the long run by the speed of adjustment of 41.5 per cent in a year. The dynamic analysis reveals that the most exogenous variable is crude oil production as it is mostly dependent on itself, and relatively less is accounted by other two variables; GDP is a relatively less exogenous variable, and crude oil exports fairly good proportion of forecast error. Further, we found that the most endogenous variable is crude oil imports which is mostly dependent on crude oil production.