Demand Estimation of Onion Exports
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This document analyzes the demand for Indian onion exports using econometric modeling. It begins with background on India's onion production and volatility of onion prices. Time series data from 1980-2013 on Indian onion exports, price of onions in India, per capita income in Bangladesh, and the Bangladesh-India exchange rate are described. Correlation and regression analyses using additive linear and multiplicative functions are performed to develop demand equations. Both models show significant relationships between the dependent variable of onion export quantity and independent variables of price, per capita income, and exchange rate. The analyses find strong fits for both specified models.
Demand Estimation of Onion Exports
- 1. Demand Estimation of Indian Onion Exports Vivek RS MBA 12111 Amrita School of Business, Coimbatore Agil V Joseph MBA 12003
- 2. Flow About Onion Data Description Data Trend Analysis Demand Equation Residual Statistics Economic Environment and Policy 2
- 3. Economic Environment and Policy INTRODUCTION Economic Environment and Policy 3
- 4. About Onion ☼ Onions are considered an indispensable ingredient of most Indian cooking ☼ Research suggests onions were first grown in Iran and West Pakistan before 15th century ☼ Onion is one of the most market sensitive commodities that creates ripples in the trade as well as political circles. Economic Environment and Policy 4
- 5. About Onion ☼ Onion production in India in 2012-13 is 16,308.98 Tonnes ☼ India is the second largest producer of Onion after China ☼ Among the agricultural products, prices of onions are more volatile than those of the non-farm commodities due to low price and income elasticity and inherently unstable production Economic Environment and Policy 5
- 6. Specification of the model ⁞Additive linear function ⁞Y = a + b1X1+ b2X2+ ….+ bkXk+ µ ⁞ordinary least squares (OLS) ⁞Multiplicative function ⁞Log Q = β1 + β2 Log X1 + β3 Log X2 +…..+ βkLog Xk Economic Environment and Policy 6
- 7. Economic Environment and Policy DATA DESCRIPTION Economic Environment and Policy 7
- 8. No of Variable Yearly Data from : : 33 Data Set 1980-81 to 2012-2013 Source National Horticultural Research and Development Foundation International Monetary Fund, World Economic Outlook Database, October 2013 Economic Environment and Policy 8
- 9. Independent Variable Price of Onion ◘ It is assumed that there is and inverse relation between price and quantity Economic Environment and Policy 10
- 10. Independent Variable Per Capita of Bangladesh ◘ Bangladesh accounts to, more than 40% of Onion Export from India. ◘ Per capita Income is assumed to have an impact on demand for onion exports. ◘ Bangladesh Per Capita is taken as proxy to determine this assumption. Increase in per capita(Importing Nations) is assumed to encourage Indian exports Economic Environment and Policy 11
- 11. Independent Variable Direct Exchange rate of Bangladesh ◘ Countries exchange rate is assumed to impact the onion exports. ◘ Bangladesh exchange rate is taken as proxy to verify this assumption. Appreciation of (Importing Nations) currency is assumed to encourage Indian exports. Economic Environment and Policy 12
- 12. Economic Environment and Policies DATA TREND Economic Environment and Policy 13
- 13. Economic Environment and Policies DEPENDENT VARIABLE Economic Environment and Policy 14
- 14. 2500000.00 Quantity of Exports Qty (MT) 2000000.00 1500000.00 Quantity (MT) 1000000.00 Expon. (Quantity (MT) ) 500000.00 0.00 Year Economic Environment and Policy 15
- 15. Economic Environment and Policies INDEPENDENT VARIABLE Economic Environment and Policy 16
- 16. 30,000.00 Price of Onion Price( ) 25,000.00 20,000.00 Price Per Metric Tone 15,000.00 Expon. (Price Per Metric Tone) 10,000.00 5,000.00 0.00 Year Economic Environment and Policy 17
- 17. Per Capita Income Bangladesh Price(USD) 1000.00 800.00 600.00 Per Capita Bangladesh 400.00 Expon. (Per Capita Bangladesh) 200.00 0.00 0 10 20 30 40 Year Economic Environment and Policy 18
- 18. Direct Exchange Rate Bangladesh 100.00 Prcie (USD) 80.00 Direct Exchange Rate(bangladesh) 60.00 40.00 Expon. (Direct Exchange Rate(bangladesh)) 20.00 0.00 Year Economic Environment and Policy 19
- 19. Economic Environment and Policy ANALYSIS Economic Environment and Policy 20
- 20. Descriptive Statistics Additive linear function Quantity (MT) Price(MT) Per Capita Bangladesh Direct Ex Rate(bangladesh) Mean 6,51,239.70 7,613.16 390.27 48.48 Std. Deviation 5,17,191.75 5,404.21 181.52 17.72 Multiplicative function Quantity (MT) Price(MT) Per Capita Bangladesh Direct Ex Rate(bangladesh) Economic Environment and Policy Mean Std. Deviation 13.109090909 .7487007231 8.688090909 .7476983167 5.879909091 3.811454545 .4069988762 .3878104475 21
- 21. Coefficients Additive linear function (Constant) Price(MT) Per Capita Bangladesh Direct Ex Rate(bangladesh) Unstandardized Coefficients Standardized Coefficients B Std. Error Beta t -800130.532 149563.096 -5.350 -75.997 21.372 -.794 -3.556 2842.065 684.065 .997 4.155 18991.326 5338.850 .651 3.557 Correlations Sig. Zero-order Partial Part .000 .001 .710 -.551 -.275 .000 .841 .611 .321 .001 .847 .551 .275 Multiplicative function (Constant) Price(MT) Per Capita Bangladesh Direct Ex Rate(bangladesh) Unstandardized Coefficient Standardized Coefficients B Std. Error Beta t Economic Environment and Policy 4.812 .892 5.392 -.545 .253 -.544 -2.151 1.192 .360 .648 3.316 1.580 .476 .818 3.320 Correlations Sig. Zero-order Partial Part .000 .040 .837 -.371 -.149 .002 .899 .524 .230 .002 .897 .525 .230 22
- 22. Hypothesis ≡ Null hypothesis, H0: bi = 0 ≡ There is no relation between the Independent variable( i.e. price of onion, Per Capita income of People and Direct Exchange rate) and Dependent Variable(i.e. Export Demand) ≡ Alternative hypothesis, Ha: bi ≠0 ≡ There is linear relationship Existing between Independent variable and the Dependent variable. Economic Environment and Policy 23
- 23. Testing Significance Additive linear function Variable t-Value Critical Decision Conclusion Price Per Metric Tone -3.556 > 1.699 Reject Null Significant Bang Per Capita 4.155 > 1.699 Reject Null Significant Direct Exchange Rate 3.557 > 1.699 Reject Null Significant Multiplicative function Variable t-Value Price Per Metric Tone -2.151 > 1.699 Reject Null Significant Bang Per Capita 3.316 > 1.699 Reject Null Significant 3.320 > 1.699 Reject Null Significant Direct Exchange Rate Critical Economic Environment and Policy Decision Conclusion 24
- 24. Economic Environment and Policy R2 AND F-TEST Economic Environment and Policy 25
- 25. Model Summary Additive linear function Change Statistics F- Test Significance R R SquareAdjusted R SquareStd. Error of the EstimateR Square Change F Change df1 df2 Sig. F Change 0.91 .827 .809 226281.1583138930 .82759.671>2.7029 46.056 3 .000 Significant Multiplicative function F- Test Significance Change Statistics R R SquareAdjusted R SquareStd. Error of the EstimateR Square Change F Change df1 df2 Sig. F Change 46.056 >2.70 0.93 .861 .846 .2936555913 .861 59.671 3 .000 Significant 29 Economic Environment and Policy 26
- 26. Economic Environment and Policy DEMAND EQUATION Economic Environment and Policy 27
- 27. Additive Linear Function Y= -800130.532 - 75.997X1 +2842.065X2 + 18991.326X3 Y X1 X2 X3 = = = = Export Demand for Onion Price Per Capita Bangladesh Direct Ex Rate Bangladesh Economic Environment and Policy 28
- 28. Multiplicative Function Ln(Y)= 4.812- .545ln(X1)+ 1.192ln(X2)+1.580ln(X3) Y X1 X2 X3 = = = = Export Demand for Onion Price Per Capita Bangladesh Direct Ex Rate Bangladesh Economic Environment and Policy 29
- 29. Economic Environment and Policy RESIDUAL STATISTICS Economic Environment and Policy 30
- 30. Additive liner function Predicted Value Residual Std. Predicted Value Std. Residual Minimum Maximum Mean Std. Deviation 100726.859375000 2064610.250000000 651239.696969697 470196.1757152050 -353483.1562500000 714128.9375000000 .0000000000 215413.2449813360 -1.171 3.006 .000 1.000 -1.562 3.156 .000 .952 Multiplicative function Predicted Value Residual Std. Predicted Value Std. Residual Minimum 12.026122093 -.5948712230 -1.559 -2.026 Maximum 14.593121529 .4999719560 2.137 1.703 Economic Environment and Policy Mean 13.109090909 .0000000000 .000 .000 Std. Deviation .6945527820 .2795517943 1.000 .952 31
- 31. Case wise Diagnostics Additive liner function Case Number Std. Residual Quantity (MT) Predicted Value Residual 5 3.156 1.8730020E+06 1158873.042722460 714128.9572775420 Economic Environment and Policy 32
- 32. Thank You