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Impact of Macroeconomic Factors on Automobile Demand in India.

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    • Abstract:
      The Indian automobile industry is growing remarkably after 1991 following India's growing openness, income of the people, the arrival of new and existing models, easy availability of finance at relatively low rate of interest, and price discounts offered by the dealers and manufacturers. Although the automobile demand depends on number factors, but this study attempts to explore the interactions between India's automobile sales and the hike in fuel prices, lending rate, and GDP per capita in the automobile industry in India. Hence, this study has applied the cointegration and the vector error correction models to analyse the possible causal relations between the variables mentioned above. The results find the evidence of a positive and long-run relationship between automobile sales and GDP per-capita and the remaining variables have the inverse relationship with automobile demand. As we can clearly see, the higher GDP leads to higher volume of automobile sales. However, interest rate, and fuel price have a negative relationship with both passenger and commercial vehicles sales. Each of these factors plays a key role in determining the level of auto demand. The passenger and commercial vehicles demand model estimation through unit root test found that they have long-term, positive equilibrium relationship with the GDP per-capita. The error correction term is negative and statistically significant. This study may suggest that if the Government may help by mandating higher fuel efficiencies for vehicles and provide facilities for improving credit availability and reducing dependence on foreign oil that may trigger the demand for sales in Indian automobile industry. [ABSTRACT FROM AUTHOR]
    • Abstract:
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