INTERNATIONAL JOURNAL International Journal of Management (IJM), OF ISSN MANAGEMENT 0976 6502(Print), ISSN (IJM 0976 )

6510(Online), Volume 4, Issue 2, March- April (2013)

ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 4, Issue 2, March- April (2013), pp. 244-252 IAEME: www.iaeme.com/ijm.asp Journal Impact Factor (2013): 6.9071 (Calculated by GISI) www.jifactor.com

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PERFORMANCE AND FORECASTING OF INDUSTRIAL GOODS EXPORTED FROM INDIAN PUNJAB SINCE 1991
Dr. Jasdeep Kaur Dhami AP, Lovely Professional University, Phagwara,Punjab Manish Gupta Ph.D. Candidate Discipline of Management, Lovely Professional University Phagwara Punjab

ABSTRACT Punjab is predominantly agricultural state and economy mainly depends upon agriculture. Now there is a time to report that Punjab economy is not only known for its agriculture production rather industrial sector is also playing an important role in the overall development of the Punjab. Therefore, the need of the hour is to devote greater attention towards the development of industries in the state. Only then, Punjab will be able to maintain its flourishing and strong economy. Period 1990-2010 has been divided into two decades i.e the first decade (1990-2000) and second decade (2000-2010).The average of annual growth rate of exports in first decade was 21.4 per cent, which decreased to 16.2 per cent in the second decade. It clearly shows decrease in the annual compound growth rate exports from Punjab. Projections have been made with the help of ARIMA model for the industrial exports of Punjab at current prices on the basis of their actual performance during 1991-92 to 200910. Punjab can export goods worth Rupees 43814 crore in 2020-21. Keywords: International Trade, Export Performance, ARIMA, Industry. 1. INTRODUCTION Punjab economy is a part of Indian economy. No country, state or region can make progress on the basis of primary productive occupations alone, especially when such a region has a large and rapidly increasing population. To achieve higher level of income, higher
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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) standard of living, higher purchasing power, greater opportunities for employment and over all development, better, proficient and optimum use of natural and agricultural resources are vital. Punjab is predominantly agricultural state and economy mainly depends upon agriculture. Now there is a time to report that Punjab economy is not only known for its agriculture production rather industrial sector is also playing an important role in the overall development of the Punjab. Therefore, the need of the hour is to devote greater attention towards the development of industries in the state. Only then, Punjab will be able to maintain its flourishing and strong economy. The main aim of the paper to bring the notice that Punjab economy also has the industrial potential and with help of industrial exports, the economy can achieve the higher rate of growth. Punjab has highly developed small scale industries and has surplus of various small scale and other industrial and manufactured products such as bicycles, sewing machines, hosiery goods, sports goods, leather goods, hand tools and machine tools etc. Intensive and commercial agriculture has generated surplus income in Punjab and thousands of migrant and NRI Punjabis are sending large amount of money back to their homes in Punjab. This has resulted in higher purchasing power and there has developed demand for luxury and consumer goods in Punjab. Therefore, Punjab has a large flourishing trade. This trade of Punjab is internal or inter-state or international. This paper consider only international i.e. goods which are exported to other countries from Punjab and contribution of Punjab state in India foreign trade. Punjab is an agriculture dominant state. It has surplus of agricultural produce. With a population of 27.7 million (Data based on 2001 Census), the two-thirds (66.05 per cent) of the population is dependent on agriculture. Though Punjab is only 1.53 per cent of the geographical area of India, but its contribution to Indian agriculture is remarkable. In 2009-10, the total production of food grains in the state was around 26.9 million metric tonnes. In 2009-10, the total fruit production was 1.3 million metric tonnes. In case of food grains, wheat is the major crop. It was followed by rice and maize. Punjab is the second-largest producer of wheat in the country, with a share of around 20 per cent of the total wheat production. Besides, Punjab has tremendous potential to develop food-processing industry of citrus fruits, grapes and potatoes. Potato production in the state was around 2.1 million metric tonnes in 2009-10. (Statistical Abstract of Punjab-Various issues) The principal export items were yarns and textiles, hosiery and readymade garments, rice and machine tools/hand tools in the year 2009-10.Ludhiana, Jalandhar and Amritsar account for around 92 per cent of the total exports of Punjab. Clusters identified for bicycles and bicycle parts (Ludhiana), steel re-rolling (Mandi Gobindgarh), textiles (Ludhiana), sports and leather goods (Jalandhar), and woollens (Amritsar). (ibef.org) A large part of industrial exports of Punjab originated from its three major industrial districts namely Ludhiana (51 per cent), Amritsar (18 per cent) and Jalandhar (21.7 per cent) in 1999-2000 and in the year 2009-10 total exports from Jalandhar were Rs. 2729.46 crore, Amritsar Rs. 2306.53 crore and from Ludhiana Rs. 9730.73 crore. Total exports from Punjab in 2009-2010 were worth Rs. 15972.48 crore. (Department of Industries & Commerce Punjab)

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)
Table-1.1: Annual Growth of Export State of Punjab and Nation (1990-2010) India's Exports (in cr) 32558 44042 53688 69751 82674 106353 118817 130101 139753 159561 203571 209018 255137 293367 375340 456418 571779 655864 840755 845534 Punjab's Exports (in cr) 769 901 1215 1815 2082 2565 3641 4205 3629 4063 4015 4408 7014 8933 7914 9656 11798 11267 13888 15972 India's Annual Export Growth 17.7 35.3 21.9 29.9 18.5 28.6 11.7 9.5 7.4 14.2 19.5 27.6 2.7 22.1 15.0 27.9 21.6 25.3 14.7 28.2 0.6 18.6 Punjab's Annual Export Growth 18.8 17.1 34.9 49.4 14.7 23.2 42.0 15.5 -13.7 11.9 21.4 -1.2 9.8 59.1 27.4 -11.4 22.0 22.2 -4.5 23.3 15.0 16.2

Year 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-2000 Average 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Average

Source: Govt. of Punjab, Statistical Abstract of Punjab, (various Issues) Table No: 1 reveals the exports from Punjab during 1990-2010. Period 19902010 has been divided into two decades i.e the first decade (1990-2000) and second decade (2000-2010). However the average of annual growth rate of exports in first decade was 21.4 per cent, which decreased to 16.2 per cent in the second decade. It clearly shows decrease in the annual compound growth rate exports from Punjab. It substantiates the fact that exports from Punjab were declined during the second decade. On the whole, it can be said that the growth of exports from Punjab was not good. There are many factors responsible for this. 2. TIME SERIES MODELING USING ARIMA MODELS These are special type of regression model where dependent variable is considered to be stationary and independent variable is lags of dependent variable and lags of errors. An ARIMA process is a combination of an Auto regressive and a Moving Average Process. Box and Jenkins (1976) first introduced ARIMA models. A time series can follow an ARIMA process only when it is stationary. A time series is said to be stationary only when it exhibits mean reversion around a constant long run mean, has a finite variance and decreasing correlogram as lag length increases. Stationarity is important because if the series is nonstationary then all the typical results of the classical regression analysis are not valid.
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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) 2.1 Autoregressive Model An autoregressive model of order p is represented as: Yt = 1Yt 1 + 2Yt 2 + ..... pYt p + u t ----------------------------- (1) Where, < 1 and ut is a gaussian (white noise) error term. For the AR (p) model to be stationary is that the summation of the p autoregressive coefficients should be less than 1:
p

i =1

<1

----------------------------------------- (2)

If the observations are generated by an AR (p) process then the theoretical partial autocorrelations will be high and significant for up to p lags and zero for lags beyond p. This rule is generally utilized to define which process the series is following and is incorporated in the ARIMA model. 2.2 Moving Average Model A moving average model of order q can be written as
Yt = u t + 1u t 1 + 2 u t 2 + ... + q u t q

-------------------- (3)

Moving Average MA (q) process is an average of q stationary white noise process, hence it is always stationary as long as q has a finite value. A time series is said to be invertible if it can be represented bya finite order MA or convergent autoregressive process. Invertiblity is an important property for identifying the order of MA process using Autocorrelation and Partial Auto Correlation Function as in this case it is assumed that Yt sequence is well approximated by auto regressive model. An MA(1) process can be inverted to an infinite order AR process with geometrically declining weights if the necessary condition < 1 is met. The mean of the MA process will be clearly equal to zero as it is the mean of white noise terms. For a MA (q) model correlogram (ACF) is expected to have q spikes for k = 0 and then go down immediately. Auto covariance of a MA process is equal to zero. 2.3 ARMA Models These models are combinations to two processes and usually represented by ARMA(p,q). The general form of ARMA (p,q) models is represented by :

Yt = 1Yt 1 + 2Yt 2 + ... + pYt p + ut + 1ut 1 + 2 ut 2 + ... + q ut q

The equation can be rewritten as:
p q

---------------------------------------- (4)

Yt = iYt i +ut + j ut j
i =1 i =1

--------------------------------- (5)

For stationarity of ARMA process only AR part of the model need to be stationary as MA part by default is stationary.
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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) 2.4 Integrated processes and the ARIMA models ARMA models can only be applied on a stationary time series. If a series is not stationary then stationarity need to be induced into it by differencing it such that differenced time series Yt is represented by: Yt = Yt Yt 1 -------------------------------------- (6)

Generally time series need to be difference atleast once to make them stationary. After differencing once the series hence obtained is said to integrated to order one and denoted by I(1). Hence a series which needs to be differenced d times to make it stationary and then follows ARMA(p,q) model then the series is said to be following ARIMA(p,d,q) process. 3. METHODOLOGY Moving Average structure as explained by ARIMA models. Punjabs export of industrial goods will be modeled as ARIMA process. Identification of the values of parameters p,d and q is done on basis of ACF and PACF analysis. Data analyzed in the study is yearly exports from Punjab in Crore Rupees from 1991-1992 till 2009-2010. Data from 1990-91 till 2009-10 is used to train the structural models while next 10 years data is used to test the accuracy of the model forecast. Table (1) describes the data used in the analysis. First and foremost step before fitting the model is making the time series stationary. If time series is not stationary then it has to be transformed to make it stationary. Generally time series is differenced to make it stationary. Plots of ACF and LBQ test statistics will be used to check the stationarity of the model. Table1.2 AUTO-ARIMA (Autoregressive Integrated Moving Average) Models Adjusted R-Squared P=1, D=0, Q=0 P=2, D=0, Q=0 P=0, D=0, Q=2 P=2, D=2, Q=0 P=0, D=0, Q=1 P=0, D=2, Q=0 P=0, D=1, Q=0 P=2, D=1, Q=0 P=0, D=1, Q=1 P=1, D=1, Q=0 0.9457 0.9408 0.8423 0.6337 0.5715 0.0000 0.0000 -0.0155 -0.0532 -0.0599 Akaike Information Criterion (AIC) 15.7671 16.6282 17.6791 16.4837 18.7356 17.5143 15.8895 15.7450 15.8845 16.8016 Schwarz Criterion (SC) 16.0771 17.1100 18.1285 17.0035 19.0351 17.6748 16.0445 16.2450 16.1944 17.1228 DurbinWatson Statistic (DW) 2.4824 2.2465 0.3550 1.6495 0.5412 2.8611 1.9995 1.5883 1.8398 1.9645 Number of Iterations 0 0 32 0 29 0 0 0 12 0 Mode l Rank 1 2 3 4 5 6 7 8 9 10

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) Table 1.3 Regression Statistics R-Squared (Coefficient of Determination) Adjusted R-Squared 0.9487 0.9457 Akaike Information Criterion (AIC) Schwarz Criterion (SC) Log Likelihood Durbin-Watson (DW) Statistic Number of Iterations 15.7671 16.0771

Multiple R (Multiple Correlation Coefficient) Standard Error of the Estimates (SEy) Number of Observations

0.9740 4512.76 19

-149.79 2.4824 0

Table 1.4 Regression Results Intercept Coefficients Standard Error t-Statistic p-Value Lower 5% Upper 95% 283.9372 414.6082 0.6848 0.5027 1005.1924 -437.3180 AR(1) 1.0945 0.0617 17.7309 0.0000 1.2019 0.9871

Table 1.4 Analysis of Variance Mean of Square s 347764 392.9 110617 8.92 FStatisti c 314.38 pValu e 0.000 0

Sums of Squares 347764392 .9 18805041. 67 366569434 .5

Hypothesis Test Critical F-statistic (99% confidence with df of 1 and 17) Critical F-statistic (95% confidence with df of 1 and 17) Critical F-statistic (90% confidence with df of 1 and 17) 8.399 7 4.451 3 3.026 2

Regression Residual

Total

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) Table 1.5 Autocorrelation
Time Lag 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 AC 0.7970 0.6231 0.5105 0.3424 0.2154 0.1320 (0.0037) (0.1069) (0.1545) (0.2020) (0.2614) (0.3085) (0.3492) (0.3631) (0.3690) (0.3455) (0.2919) (0.2328) PAC 0.7970 (0.0332) 0.0656 (0.2122) 0.0028 (0.0122) (0.1815) (0.0433) 0.0012 (0.0186) (0.1220) (0.1032) (0.0656) (0.0112) (0.0877) 0.0067 0.0397 0.0176 Lower Bound (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) (0.4472) Upper Bound 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 0.4472 Q-Stat 14.0796 23.1910 29.6905 32.8098 34.1325 34.6671 34.6676 35.0824 36.0354 37.8442 41.2517 46.6772 54.7855 65.3050 78.8895 94.7629 111.7670 133.3930 Prob 0.0002 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Figure 1.1

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) Table 1.7 Projections of Exports from Punjab till 2020 S.No Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Exports (Rs.Crore) 901 1215 1815 2082 2565 3641 4205 3629 4063 4015 4408 7014 8933 7914 9656 11798 11267 13888 15972 Forecasted Value 1126 1270 1614 2270 2563 3091 4269 4886 4256 4731 4678 5109 7961 10061 8946 10853 13197 12616 15485 17765 19728 21877 24229 26802 29619 32703 36077 39771 Error -224.6163907 -55.09188151 201.2316 (188.4752) 2.2903 549.6413 (64.0528) (1,257.3572) (192.9187) (715.9366) (270.4001) 1,905.4570 972.1606 (2,147.2066) 710.1004 945.4617 (1,929.9815) 1,272.2040 487.4899

43814 Source: Govt. of Punjab, Statistical Abstract of Punjab, (various issues)

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International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013) Fig 1.2 Comparison of actual and forecasted Exports

Projections have been made for the industrial exports of Punjab at current prices on the basis of their actual performance during 1991-92 to 2009-10. Table 1.7 shows these projections. Punjab can export goods worth Rupees 43814 crore in 2020-21. Thus, based on Punjabs actual exports, there exists a scope for her exports in future. Therefore, efforts at the international level are required to be made to increase the exports to earn a fair name for Punjab in the world trade. REFERENCES 1. 2. 3. 4. 5. Statistical Abstract of Punjab, Government of Punjab, various issues. Economic Survey of Punjab, Government of Punjab, various issues. Economic Survey of India, Government of India, various issues. http://www.ibef.org/, accessed on 12th May 2012 Nanda (1988),Forecasting: Does the Box-Jenkins Method Work Better than Regression? Vikalpa, Vol. 13, No. 1, January-March 1988. 6. www.rbi.org 7. www.pbindustries.gov.in/
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