Académique Documents
Professionnel Documents
Culture Documents
Part A
Ans: Data processing is a process of skilfully organising of data for the purpose of data analysis
and interpretation. Data processing can be done manually when the data collected is limited or it
can be done mechanically when the collected data involve huge quantities. Data processing is the
intermediary stage between data collection and data analysis. It needs to be planned at the stage
of research design.
Research Findings
Drawing Conclusions
Recommendations
1. Editing
2. Coding
3. Classification
4. Tabulation
5. Graphic Presentation
1. EDITING:
Editing is the process of checking errors and omissions in data collection, and making
corrections, if required. Editing is required when:
There is inconsistency in responses given by the respondents.
Respondents may provide incorrect or false responses.
Some vague/ incomplete answers given by the respondents.
No responses are provided by the respondents for certain questions.
Types of Editing:
Field Editing
Central Editing
2. CODING:
It is a process of assigning codes to the various statements or questions in the
questionnaire. Coding is specially required when the sample size is large and there is
large amount of data collection from respondents. Coding facilitates proper tabulation
and analysis of data.
Types of Codes:
Numerical Codes
Alphabetical Codes
Alpha-Numerical Codes
3. CLASSIFICATION:
It is the process of grouping of collected data into different categories. Therefore, coding
is an element of classification. The classification can be according to different categories:
Age Group Wise, Gender Wise, Educational Level Wise, Income Group Wise,
Occupation Wise, etc.
Each of the categories can be further divided into sub-groups. For example: The age
group can be further divided into different categories such as: Children, Teenagers, Young
Adults, Middle Aged and Senior Citizens.
4. TABULATION:
It refers to transferring the classified data in a tabular format for the purpose of analysis
and interpretation. It involves sorting of data into different categories and counting the
number of responses that belong to each category.
Methods of Tabulation:
Manual Tabulation
Mechanical Tabulation
5. GRAPHIC PRESENTATION:
The research data needs to be presented effectively for quick and clear understanding.
Bar graphs, pie charts, line graphs and other pictorial devices are an excellent means to
present the data.
Ans: A single value within the range of the data that is used to reveal the general tendency and to
represent the entire data is known as a measure of central tendency.
George Simpson and Fritz Kafka state that a measure of central tendency is a typical value
around which the other values congregate.
Croxton and Cowden define an average is a single value within the range of the data that is used
to represent all of the values in the series. Since the average is somewhere within the range of
data, it is sometimes called as a measure of central value.
Objectives of Averaging:
To arrive at a single value that is representative of the characteristics of the entire mass of
data.
To get a birds eye view about a phenomenon under study.
To facilitate comparison.
To trace precise relationships.
To know about the universe from a sample.
It can be easily calculated in the case of distributions containing open end class-
intervals:
Sometimes, we are bound to use open-end classes for classification. Even in such
situations an average can be calculated very easily without any assumption regarding
such open-end classes.
MATHEMATICAL:
1. Arithmetic Mean
2. Geometric Mean
3. Harmonic Mean
POSITIONAL:
1. Median
2. Mode
1. ARITHMETIC MEAN:
It is the most popular measure of central tendency, as it is quicker and easier to compute
the average. It refers to the value obtained by dividing the sum of the values of all items
by the total number of items.
Formula:
Arithmetic mean is calculated with the following formula:
2. GEOMETRIC MEAN:
The geometric mean of any set of n numbers is the n th root of the product of the numbers.
If there are two times or values, square root of the product of the two values is the
Geometric mean, if there are three values, the cube root is the Geometric mean and so on.
It is the most appropriate average to be used when it is desired to give more weightage to
smaller items and small weightage to larger items.
3. HARMONIC MEAN:
Harmonic mean of a series is the reciprocal of the arithmetic average of the reciprocal of
the values of its various items.
n
Harmonic Mean = ______________________________
(1/x1) + (1/x2) + + (1/xn)
4. MEDIAN:
Median is the middle value of a series when the data of a series is arranged in ascending
or descending order. It divides the series in two equal parts.
5. MODE:
The mode is defined as the value of a variable which occurs most frequently.it is the
value which is repeated number of times or with the highest frequency in the series.
Croxton and Cowden define The mode of a distribution is the value at the point around
which the items tend to be most heavily concentrated.
A. M. Tuttle defines Mode is the value which has the highest frequency density in its
immediate neighbourhood.
Ans: The methods of determining correlation between variables can be divided into two groups:
Algebraic methods which include rank differences, product moment, least squares etc.
SCATTER DIAGRAM:
The pairs of values of X and Y are represented by dot points plotted on the graph paper. The
graph is called a Scatter Diagram.
When X and Y are meaningfully linked with each other their scatter diagrams may tally with any
one of the above standard scatter diagram.
Spearman Rank Correlation Coefficient uses ranks to calculate correlation. It is also called as
correlation coefficient between ranks. It is sometimes denoted by rs.
E.g. A talent contest where 5 competitors are evaluated by 2 judges A & B. Usually judges award
numerical scores for each contestant after his/her performance.
Spearman Rank Correlation Coefficient can indicate if judges agree to each others views as far
as talent of the contestants are concerned. This correlation coefficient can indicate if the judges
are unanimous.
Interpretation of numerical values:
The numerical value of correlation coefficient, rs, ranges between -1 and +1. The correlation
coefficient is the number indicating as to how the scores are relating.
In general,
Rs = 0 indicates no agreement
Assigning Ranks:
In order to compute Spearman Rank Correlation Coefficient, it is necessary that the data can be
ranked. Ranks are assigned separately for the 2 judges starting either from the highest or from
the lowest score.
Spearman Rank Correlation Coefficient tries to assess the relationship between ranks without
making any assumptions about the nature of their relationship. It is a non-parametric measure of
correlation.
It is one of the measure of correlation which quantifies the strength as well as direction of such
relationship.
Two variables are said to be correlated if change in one variable is accompanied by change in the
other either in the same or reverse direction.
Ans: The two techniques are directed towards a common purpose of establishing the degree and
the direction of relationship between two or more variables but the methods of doing are
different. However, there are some basic differences in the two approaches which have been
summarised below:
The first step is to state the research problem. The research problem needs to identify the
population of interest, and variables of under investigation.
The population of research refers to the students, and the variables include the teaching methods
and the marks.
This step enables the researcher not only define what is to be tested but what variables will be
used in sample data collection. The type of variables, whether categorical, discrete or continuous,
further defines the statistical test which can be performed on the collected data.
The research problem or question is converted into a null hypothesis and an alternative
hypothesis. The hypothesis are stated in such a way that they are mutually exclusive which
means that if one is true then the other must be false.
Null Hypothesis: It is a statement that declares the observed difference is due to chance. It is
the hypothesis the researcher hopes to reject or disprove.
It is clear that Null Hypothesis is a hypothesis of no difference. The main problem of testing
hypothesis is to accept or to reject the Null Hypothesis.
The Alternative Hypothesis specifies a definitive relationship between two variables. Only one
Alternative Hypothesis is tested against the Null Hypothesis.
3. Significant Level:
After formulating the hypothesis, the researcher must determine a certain level of significance.
The confidence with which a Null Hypothesis is accepted or rejected depends on the level of
significance.
4. Test Statistic:
A statistic used to test the Null Hypothesis. The researcher needs to identify a test statistic that
can be used to assess the truth of the Null Hypothesis. It is used to test whether the Null
Hypothesis set up should be accepted or rejected.
Test Statistic is calculated from the collected data. There are different types of test statistics.
Every test in statistics indicates the same. Based on the sample data, it gives the probability that
can be observed. When the p-value is low, it means that the sample data are very significant and
it indicates that the null hypothesis is wrong. When the p-value is high, it suggests that the
collected data are within the normal range.
The region of acceptance is a range of values. If the test statistic falls within the region of
acceptance, the Null Hypothesis is not rejected. The region of acceptance is defined so that the
chance of making a Type I error is equal to Alpha level of significance.
The set of values outside the region of acceptance is called Region of Rejection. If the test
statistic falls within the region of rejection, the Null Hypothesis is rejected. It is said that the
hypothesis has been rejected at the Alpha level of significance.
(Alpha the probability the researcher is willing to take in falsely rejecting a true Null
Hypothesis)
A hypothesis test may be one-tailed or two-tailed. Whether the test is one sided or two sided
depends upon an alternative hypothesis and the nature of the problem.
A test of a Statistical Hypothesis, where the region of rejection is on only one side of sampling
distribution, is called one tailed test. In one tailed test, the test statistic for rejection of Null
Hypothesis falls only in one side of sampling distribution curve.
Whether to apply one tailed test or two tailed test depends upon the nature of the problem. One
tailed test is used when the researchers interest is primarily on one side of the issue.
In two tailed test, the test statistic for rejection of Null Hypothesis falls on both sides of the
sampling distribution curve.
The statistical analysis shows that the significance level is below the cut off value we have set,
we reject the null hypothesis and accept the alternative hypothesis. If significance level is above
the cut off value, we fail to reject null hypothesis and cannot accept the alternative hypothesis.
Ans: Parametric Test is a statistical test that depends on an assumption about the distribution of
data, that the data are normally distributed. When considering a normal distribution of a
population these features are known as Parameters. Parametric analysis relies on the data being
normally distributed so that an estimation of the underlying populations parameters can be
made. These can then be used to test the null hypothesis. As only quantitative data can have a
normal distribution, it follows that parametric analysis can only be used on quantitative data.
Provided they are appropriately used, parametric test derive more information about the whole
population than non-parametric ones.
Ans: Chi Square is the measure which evaluates extent to which a set of the observed
frequencies of a sample deviates from the corresponding set of expected frequencies of the
samples. It is the measure of aggregate discrepancies between actual and expected frequencies. It
was first discovered by Helmet in 1875. Karl Pearson derived it independently in 1990 and
applied it as a test of goodness of fit. It is used as a test statistic in testing hypothesis that
provides the theoretical frequencies with which observed frequencies are compared.
If O denotes the observed frequency and E the corresponding expected frequency of a class
interval or cell, then we define Chi Square by the relation.
Where the summation extends to the whole set of class intervals or cells, another useful form is
given by
Any statistical test that uses the Chi Square distribution can be called Chi Square Test. It is
applicable both for large and small samples depending on the context.
Eg. Suppose a person wants to test the hypothesis that success rate in a particular English test is
similar for students studied in Private Schools and Government Schools.
If we take random sample size 80 students and measure both types of schools as well as
success/failure status of each of the student, the Chi Square test can be applied to the test of
hypothesis.
There are different purposes for the test. They are as follows:-
The Chi Square test for single variance has an assumption that the population from which the
sample has been normal. This normality assumption need not hold for chi square goodness of fit
test and test for independence of attributes.
When implementing these two tests one has to ensure that expected frequency in any cell is not
less than 5. If it is so, then it has to be pooled with the preceding or succeeding cell so that
expected frequency of the pooled cell is atleast 5.
3. Calculate the expected frequencies based upon the application of theoretical distribution.
4. Calculate the difference between the observed and expected frequencies correspondingly.
6. Ascertain the appropriate value from the table at a particular level of significance.
Ans: The essential characteristics of a good research report are stated as follows:
1. Informative:
The research report must be informative. The research report must provide adequate information
to the concerned authorities to take appropriate decisions. Inadequate information may not
facilitate proper decision making on the part of the management.
2. Clarity:
The report must be written in simple and lucid language. The reader should find no difficulty in
understanding the contents of the report. The reader should be able to understand the contents in
the first reading itself. Technical language should be used only in exceptional areas. Ambiguous
words and phrases should be avoided in the reports.
3. Concise:
The report must be written briefly. Maximum information must be provided in minimum words.
As far as possible, lengthy reports must be avoided. This is because, lengthy reports are often
confusing and they require a lot of time for the reader to note the contents.
4. Accuracy:
The report should contain accurate facts and figures. This is because managers base their
decisions on the facts and figures of the reports. If the reports are inaccurate or contain wrong
facts and figures, then it will lead to poor decisions.
5. Reliability:
A good report must be reliable. The information in the report must be collected from reliable
sources. While collecting information for the purpose of preparing reports, care must be taken to
check the validity and genuineness of the source. Reports must not contain out dated data. If the
reports are based on secondary sources, the researcher must check the genuineness of the data.
6. Objectivity:
The report must be objective. It must contain only objective facts and figures. The reports must
not be biased or subjective. The report must not be influenced by personal bias of the researcher.
Personal bias adversely affects the decision making. Therefore, the research must be objective
especially in the case of commercial research.
7. Logical Arrangement:
The research must be written in a systematic manner. The different parts of the report must be
arranged in a logical sequence as follows:
Conclusion
Recommendations
Appendix
Bibliography
8. Secrecy:
Certain report findings must be kept secret. Eg. A committee may set up to look after the
malpractices of a certain manager. The committee members should not leak out the findings. The
report finds must be strictly provided only to the top management.
Certain reports must be submitted within a particular time limit. Eg. Committee report must be
reported within time limit so that suitable action can be taken.
The report must be written in a suitable format. The report must be divided into paragraphs,
preferable numbered and be given a suitable heading for each paragraph. The report must also
contain a suitable title.
Ans: There are various types of Research Report. The types of research report are as follows:
1. Technical Report:
The technical research is written in technical language. It follows a specific pattern and consists
of several sections with proper headings and paragraphs.
2. Popular Report:
It is designed for executives and other non-technical users. The reader is more interested in
knowing the findings of the research, conclusions and recommendations.
While writing this report, certain essentials must be followed such as concise and clarity,
accuracy of data, reliability of data, objectivity and not biased and logical arrangement of
different parts of report etc.
This type of research report is meant for commercial and social research because it is meant for
non-technical people, especially executives in a commercial organization.
3. Interim Report:
When there is long gap between data collection and presentation of final report, the study may
lose its importance. Therefore, the sponsor may also lose interest in the research and/or research
report. Therefore, in such a situation, the researcher may present interim report. The interim
report may also contain the first analysis of the problem and the final analysis of certain aspects
that have been completely analysed. This type of report enables the sponsoring authority to take
decisions without waiting for the full report.
4. Summary Report:
It is generally prepared for the use of general public. This report is desirable for any study whose
findings are of general interest. It is written in non-technical and simple language.
It contains a brief reference to the objective of the research, findings and conclusions. It is a short
report of two or three pages.
5. Research Abstract:
This is a summary of technical report. Technical students like engineering, medicine etc. are
usually prepared in on the eve of submitting their thesis. Its copies are sent to the university,
which in turn provides to the examiners or referees invited to evaluate the thesis.
6. Research Article:
This is designed for publication in a professional journal. If a study has two or more important
aspects that can be discussed independently, it is advisable to write two articles rather than to
include in a single article.
A research must be clearly written in concise and clear language. It must be logically arranged as
follows:
Objectives of Research
Findings
Recommendations
The Modern Language Association (MLA) establishes values for acknowledging sources used in
research paper. MLA citation style uses a simple two part parenthetical documentation system for
citing sources: Citation in the text of paper point to the alphabetical Works Cited list that appears
at the end of the paper. Together, these references identify and credit the sources used in the
paper and allow others to access and retrieve this material.
In MLA style, writers place references to sources in paper to briefly identify them and enable
readers to find them in the Works Cited list. These parenthetical references should be kept as
brief and as clear as possible.
The writer needs to give only the information needed to identify a source. Usually the authors
last name and page reference should suffice.
Place the parenthetical reference as close as possible to its source. Insert the parenthetical
reference where a pause would naturally occur, preferably at the end of a sentence.
Information in the parenthesis should complement, not repeat, information given in the text. If
you include an authors name in a sentence, you do not need to repeat it in your parenthetical
statement.
The parenthetical reference should precede the punctuation mark that concludes the sentence,
clause, or phrase that contains the cited material.
Electronic and online sources are cited just like print resources in parenthetical references. If an
online source lacks page numbers, omit numbers from parenthetical references. If an online
source includes fixed page numbers or section numbering, such as numbering or paragraphs, cite
the relevant numbers.
The Chicago Manual Style or CMS is a style guide for American English published since 1906
by the University of Chicago Press.
It is one of the most widely used and respected style of guides in the United States. CMS deals
with aspects of editorial practice, from American English grammar and use to document
preparation.
The Chicago Manual Style includes chapters relevant to the publishers of books and journals. It
is used widely by academic and trade publishers, as well as editors and authors who are required
by those publishers to follow it.
Chicago Style offers writers a choice of several different formats. It invites the mixing of
formats, provided that the result is clear and consistent.
2. Author Date
Choosing between the two often depends on subject matter and the nature of sources cited, as
each system is favoured by different groups of scholars.
The Notes and Bibliography style is preferred by many in the humanities, including those in
literature, history and the arts. This style presents bibliographic information in notes and often, a
bibliography. It accommodates a variety of sources, including esoteric ones less appropriate to
the author date system.
The author date system has long been used by those in the physical, natural and social sciences.
In this system, sources are briefly cited in the text, usually in parenthesis, by authors last name
and date of publication. The short citation is amplified in a list of references, where full
bibliographic information is provided.
Ans: Researcher must follow certain ethical norms or guidelines in conducting the research
work. The main ethical norms in research are briefly stated as follows:
Ans: There are various issues in research. Some of the ethical issues in research are connected
with the research process. The ethical issues relating to research process are concerned with
research design, sample size, data collection, data processing, data analysis and interpretation,
and so on. However, the ethical issues relating to research process can be avoided by systematic
planning for research and by following ethical norms in conducting the research.
One of the major ethical issues in research involves PLAGIARISM. Its the presentation of the
work of another person as ones own or without proper acknowledgement.
Plagiarism includes copying of material word for word from books, journals, internet sites, other
researchs notes, etc. it could be material that is paraphrased but closely resembles the original
source. Paraphrasing is using your own words to express someone elses ideas whilst still
preserving the main ideas of the original source.
Plagiarism does not refer to words alone it can refer to copying images, graphs, tables, and
ideas. Presentation is not limited to written work. It also includes oral presentations, computer
assignments and artistic works. If you translate the work of another person into French or
English and do not cite the source, this is also plagiarism. If you cite your own work without the
correct citation, this too is plagiarism.
Therefore, one should not copy, paraphrase or translate anything from elsewhere without stating
the source of the original text.
To give your writing credibility. You show that you have gathered idea from worthwhile
sources.
To help the reader. You enable the reader to go and check and read those sources if he/she
so wishes.
To protect yourself from plagiarism. When you cite all your sources, no one can say that
you stole or copied ideas from someone else.
Direct quotations:
When you are using someone elses exact words, you need to place quotations marks ()
around the words. You also need to be careful not to rephrase or reorganize the words; otherwise
you would be guilty of misrepresenting the author. If you want to leave out part of authors
sentence you can use three ellipsis points () to show the words which have been omitted,
directly after the quotation, you should indicate where the information come from, using one of
the standard methods (such as MLA and APA) to document your source. For more specifics,
refer to the hand-outs on MLA/APA documentation, available in H 662 or AD 103 or Go to the
Concordia University Libraries Citation Guides.
Paraphrasing:
Many students are unclear about paraphrasing. It is not acceptable to take the original phrasing
and to rearrange a few of the original words in order to produce a paraphrase; neither is it
acceptable to use the same sentence structure but just rephrase a few key words.
Example:
Original: Students frequently overuse direct quotation in taking notes and as a result their
overuse quotation in the final research paper. Probably only about 10% of your final manuscript
should appear as directly quoted matter. Therefore, you should strive to limit the amount of exact
transcribing of source materials while taking notes.
A plagiarized version: Students often use too many direct Quotations when they take notes,
resulting in too many of them in final research paper. In fact, probably only 10% of the final
copy should consist of directly quoted material. So it is important to limit the amount of source
material copied while taking notes (Lester, 196).
When you paraphrase, make sure to understand what the original is saying, then close the book
and write the passage in your own words. Also, note that you need to cite a source for a
paraphrase even through you did not quote from the source directly. In the examples above, the
source, Lester, is given after the paraphrase. When you are paraphrasing rather than using exact
words, mentioning the page number in the source parentheses is optional, but check with your
professor as some may prefer you to include it.
To avoid plagiarism in research one need to state the source from where the information is
obtained. In the research paper, some or most of the ideas may be from the researcher. However,
some ideas may have been borrowed from other source or from the people who have been
interviewed on subject. Therefore, one needs to correctly state the source from which the
information is obtained.
1. Paraphrase: So you have found information that is perfect for your research paper. Read
it and put it into your own words. Make sure that you do not copy verbatim more than
two words in a row from the text you have found. If you do use more than two words
together, you have to use quotation marks. We will get into quoting properly soon.
2. Cite: Citing is one of the effective ways to avoid plagiarism. Follow the document
formatting guideline (i.e. APA, MAL, Chicago, etc.) used by educational institution or the
institution that issued the research request. This usually entails the education of the
author(s) and the data of the publication or similar information. Citing is really that
simple. Not citing properly can constitute plagiarism.
3. Quoting: When quoting a source, use the quote exactly the way it appears. No one wants
to be misquoted most institutions of higher learning frown on Block Quotes or quotes
of 40 words or more. A scholar should be able to effectively paraphrase most material.
This process take time, but the effort pays off! Quoting must be done correctly to avoid
Plagiarism allegations.
4. Citing Quotes: Citing a quote can be different than citing paraphrased material. This
practice usually involves the addition of a page number, or a paragraph number in the
case of web content.
5. Citing Your Own Material: If some of the material you are using for your research
paper was used by you in your current class, a previous one, or anywhere else you must
cite yourself. Treat the text the same as you would if someone else wrote it. It may sound
odd, but using material you have used before is called self plagiarism, and it is not
acceptable.
6. Referencing: One of the most important ways to avoid plagiarism is including a
reference page or page of works cited at the end of your research paper. Again, this page
must meet the document formatting guidelines used by your educational institution. This
information is very specific and includes the authors, data of publication, title, and
source. Follow the direction for this page carefully. You will want to get the reference
right.
Q.13. Explain the use of SPSS Statistics for Data Analysis and Reporting.
Ans: It stands for Statistical Package for the Social Sciences. SPSS Statistics is a software
package used for analysis. Long produced by SPSS Inc., it was acquired by IBM in 2009. The
current versions (2014) are officially named IBM SPSS Statistics. Companion products in the
same family are used for survey authoring and deployment (IBM SPSS Data Collection), data
mining (IBM SPSS Modeler), text analytics, and collaboration and deployment (batch and
automated Scoring Services).
The software name stands for Statistical Package for the Social Sciences (SPSS), reflecting the
original market, although the software is now popular in other fields as well, including the health
sciences and marketing.
SPSS id a widely used program for statistical analysis in social science. It is also used by market
researchers, health researchers, survey companies, govt., Education researchers, marketing
organisations, data miners, and others. The original SPSS manual has been described as one of
Sociologys most influential books for allowing ordinary researchers to do their own statistical
analysis. In addition to statistical analysis, data management and data documentation are features
of the base software.
Having collected the data, the first step is to create the data file in SPSS. To do this, open SPSS
and you will see a blank spreadsheet ready for data input.
Example: To create a data file, we can take an example. A closed ended questionnaire is
developed to understand consumer behaviour relating to readymade garments. The questions are
related to individuals age, gender, education, occupation, monthly income and brand preference.
You could start entering data now, but it makes more sense to first define the data so that it is
easier to keep track of where you are as you enter it. Defining the data involves giving each
variable a name and specifying missing values. SPSS offer two views of the data file. You switch
from one to the other by clicking the tabs at the bottom left hand side of the screen. Variable
view is where you define the variable names and specify any other information you want to
about the variable.
Naming Variables:
Data are defined variable by variable in variable view (i.e. one row at a time). To do it, click on
cell where it says NAME. Type a meaningful name in the cell. In this case, Ive named the first
variable age. The name can be up to eight characters long and must begin with a letter.
Missing values:
Missing values are what they sound like: data points for which you have no score. For example,
some participants might not have turned up for a data collection session but you still have other
data from them that you want to use. So you need to enter the data you do have whilst taking
account of missing data points. With questionnaires, people often fail to complete one or more
items. This may be purely accidental, in which case the missing at random because there is no
systematic reason for their omission.
If you havent done so already, you should now save the file so that all your work doesnt go
down the pan if your Machine crashes! Click on file then save from the dropdown menus to get
the save as dialogue box. SPSS data files should be given the Save file name extension, which is
the default when saving a spreadsheet. That way SPSS will always recognise the file as a data
file. Give the file a meaningful name in the file name box, choose where you want to save it to
from the save in box, then click on OK to save it. Remember to save your work periodically as
you enter the data.
Now you can enter the data. Switch to Data view by clicking on the tab at the bottom left-hand of
the screen. Now simply enter each cases scores into the appropriate cells, with each case taking
one row. You can use the arrow keys on the keyboard or the mouse to move from cell to cell. The
value you type wont appear in the cell until you move to another cell but it does appear in the
box above the spreadsheet. If you have missing scores, type in the missing value that you
assigned to that variable.
Labelling Variables:
In addition to naming variable, you can label them. This means assigning a longer and more
descriptive name to the variable which can make reading the output of any analyses easier. Label
can be up to 256 characters long and can include spaces.
Youll find that the variable label will appear when you mouse over a variable name in the
column heading n Data View. You can get SPSS to print either variable names, or labels, or both
in any outputs by clicking on Edit then Options from the dropdown menus and then choosing
what format you want from the Output Labels tab.
You can even assign labels o variable values. For example, you might want to label the values for
sex so that any output that uses this variable will say male and female instead of just giving the
numbers 1 and 2. To do this, in variable View click on the appropriate cell in the values column,
then on the little grey box that appears there to get the value Label dialogue box. Now type 1 in
the Value box, then male in the Value Label Box, and then click on the Add button.
Measure/Compute:
The level of measurement used for a variable should be correct; otherwise the analysis may go
wrong. It depends on the Qualitative or Quantitative nature of the variable.
Qualitative Variables: Nominal/Ordinal Scale They can be measured with numeric scale
level, even when their categories are coded with number. Like in the case of gender, we
have coded 1 for male and 2 for female.
Quantitative Variable: they can be measured at ordinal level. Like monthly income of an
individual can be measured by numeric scale. If monthly income is classified as low,
Medium, High, we can treat it at ordinal level.
After creating the variable, click data view to enter data in the cells. You can use the editor
window like a spread sheet and enter the values accordingly.
PART B
INTRODUCTION:
The recent rise in the prices of crude oil has drawn everyones attention towards the crucial role
that oil plays in the economy of any nation. Crude oil is one of the most necessitated
commodities in the world and India imports around 100 million tons of crude oil and other
petroleum products. This in turn, results in spending huge amounts of foreign exchange. The
increasing quantum of imports of petroleum products has a significant impact on the Indian
economy, especially when crude oil prices are shooting up globally. Crude oil not only serves as
a source of energy but also as a major raw material to various industries. With no major
discoveries in the recent years, the increasing costs of production have pushed up crude oil prices
globally. Also, the high volatility in the prices of oil breaching the $100/barrel mark and rising to
a high of $147/barrel could be attributed to the fact that in the recent years, many index funds
have taken positions in commodities considering oil to be an asset stock in their portfolios. It has
been usually observed that in India, the pricing scheme is designed in such a way that it offers a
system to moderate the soaring international oil prices and thereby study the impact on growth,
inflation, etc. In spite of the global economy being affected due to the European debt crisis, crude
oil prices are soaring against a backdrop of increasing tensions around the situation in Iran. The
price of Brent crude has gone beyond $120 per barrel. This spike in crude oil price significantly
increases the energy costs of every country and becomes a major concern in the fragile global
economy. The impact of rising oil prices on the economy differs from country to country
depending upon individual energy supply and demand structures. Countries that could be
adversely affected by the increase in crude oil price are usually characterized by high net imports
of oil per GDP. Traditionally, the non-oil producing developing countries fall under this category.
Against this background, developed countries are more economical in their usage of oil and
therefore, see an easing of this adverse effect of rise in crude oil prices. This phenomena has led
to many European developed countries enjoying a significant inflow of oil money. Today, we
may find a negative impact of rise in crude oil prices. A steep fall in the current accounts leads to
further worsening of the treasury budgets, which, in turn, will further worsen the balance
between savings and investments. Also, reducing tax revenues and other extraneous factors will
further deteriorate the treasury budgets. Due to the economic crisis in Europe, where the treasury
budgets have shaken, there is a monumental imbalance between savings and investments. These
imbalances continue worsening because of rising crude oil prices, which threaten to push the
economy into much deeper crisis. When a country has a fixed nominal exchange rate and there is
also an output gap, increases in oil prices leads to an increase in the general price levels.
According to a RBI report (2005), for every unit dollar increase in crude oil price, WPI inflation
rises by 30 basis points. Kaushik Bhattacharya et al. (2005) analysed the impact of increase in oil
price on inflation. They studied the mechanism of increase in the prices of petroleum products on
the prices of other commodities and the output in India. In February 1999, from an all time low
of 11 U.S Dollars per barrel, it increased to a peak of 35 dollars in the first week of September
2000. Due to this, all oil importing countries faced the threat of oil shock; India, being a major
oil importer, was particularly affected.
Energy is the prime mover of economic growth and is vital to the sustenance of a modern
economy. Future economic growth crucially depends on the long-term availability of energy
from sources that are affordable, accessible and environmentally friendly. Efficient, reliable and
competitively priced energy supplies are prerequisites for accelerating economic growth. For any
developing country, the strategy to obtain and meet the energy requirements and energy
developments are the integral part of the overall economic strategy. Efficient use of resources
and long-term sustainability in its utilization is of prime importance for economic development.
Sustainability would take into account not only available natural resources but also to take care
of the related ecological and social aspects to meet the priority needs of the economy.
Simultaneous and concurrent action is, therefore, necessary to ensure that the short-term
concerns do not detract the economy away from the long-term goals. Realisation of high
economic growth aspirations by the country in the coming decades, calls for rapid development
of the energy market. The energy resources available indigenously are limited and may not be
sufficient in the long run to sustain the process of economic development translating into
increased energy import dependence. The base of the countrys energy supply system is tilted
towards fossil fuels, which are finite. India meets nearly 35 per cent of its total energy
requirements through imports. With the increase in share of hydrocarbons in the energy
supply/use, this share of imported energy is expected to increase. The challenge, therefore, is to
secure adequate energy supplies at the least possible cost. Although growth of the energy sector
is moderate and has, to some extent, served the countrys social needs, it has put tremendous
pressure on the Governments budget. Energy is essential for living and vital for development.
Affordable energy directly contributes to reducing poverty, increasing productivity and
improving quality of life.
INDIAN SCENARIO :
On July 27th 1961, the Government of India and BOC transformed OIL into a Joint Venture
Company (JVC) with equal partnership. ONGCs Geo-Scientific surveys and exploratory
drilling activities were also spread out to UP (1962), Bihar (1963), Tamil Nadu (1964),
Rajasthan (1964), J&K (1970),Kutch (1972), and Andhra Pradesh (1978). In spite of limited
success in these areas, ONGC pursued its exploratory efforts and was successful in
identifying hydrocarbons in Cauvery basin and Krishna Godavari basins in the mid 1980 s.
Offshore exploration was initiated in 1962 through experimental seismic surveys in the Gulf
of Cambay. Detailed seismic surveys carried out in the western offshore in 1972-73 resulted
in the identification of a large structure in Bombay Offshore which was taken up for drilling
in 1974 leading to Indias biggest commercial discovery, thereby establishing a new
hydrocarbon province. Encouraged by the success at Bombay Offshore, exploratory efforts
were expended systematically in the entire Western Offshore including Kerala Konkan basin
and Eastern Offshore areas leading again to large discoveries in the Western Offshore
(Bassein and Neelam) and substantial accumulations in the Eastern Offshore (Ravva, PY-3
etc.). ONGC went offshore in the early 1970s and discovered a giant oil field in the form of
Bombay High, now known as Mumbai High. This discovery, along with subsequent
discoveries of huge oil and gas fields in Western offshore changed the oil scenario of the
country. Subsequently over 5 billion tonnes of hydrocarbons were discovered. The most
important contribution of ONGC, however, is its self-reliance and 51 development of core
competence in E&P activates at a globally competitive level. ONGC went offshore in the
early 1970s and discovered a giant oil field in the form of Bombay High, now known as
Mumbai High. This discovery, along with subsequent discoveries of huge oil and gas fields
in Western offshore changed the oil scenario of the country. Subsequently over 5 billion
tonnes of hydrocarbons were discovered. The most important contribution of ONGC,
however, is its self-reliance and development of core competence in E&P activates at a
globally competitive level. On October, 14th, 1961, OIL became a wholly-owned GoI
enterprise by taking over BOCs 50 per cent equity and the management of Digbol oilfields
changed hands from the erstwhile AOC to OIL. For the time PELs outside the North-East,
were granted to OIL in Offshore Orissa (Mahanadi) in 1978, in Mahanadi Onshore (1981),
North-East Coast Offshore (1983), Rajasthan (1983), Saurastra Offshore (1989) and Ganga
Valley areas in UP in 1990.
The liberalized economic policy, adopted by the Government of India in July, 1991 sought to
deregulate and de-license the core sectors (including petroleum sector) with partial
disinvestments of government equity in Public Sector Undertaking and other measures.
Following this, ONGC was re-organized in February 1994 as a limited company under the
companies Act.
5. Post Liberalization:
Several committees were set up to examine various proposals for restructuring and devising
strategies to meet the challenge of the new economic environment. Among the most
prominent report was the Sundarajan Committee Report in February 1995 which favoured
de-regulation of the petroleum industry at one stroke. However, the strategic Planning group
on Restructuring of the Indian Oil Industry, the R Group, headed by the then Petroleum
Secretary. Dr. Vijay Kelkar, felt the Switchover should be in a phased manner. Commercial
hydrocarbon discoveries were reported by OIL during 1990- 91 in Assam and Rajasthan.
During 1993 -1994 ONGCs production from western offshore reached a low of 15.37 MMT,
prompting ONGC to enter into 52 Joint Ventures for developing Ravva, Mid & South Tapti,
Mukta and Panna fields. The JV initiative was fulfilled in as much as it increased the
production from these declining fields by 5 MMT in 1994-95; during the same period 5
important discoveries were made in the Bombay, Krishna Godavari and Cauvery Basins. A
committee was constituted in 1992 under the chairmanship of P.K. Kaul former cabinet
Secretary, to examine the need for restructuring of ONGC. This Committee recommended
setting up of a body, with the name and style of the Director General of Hydrocarbons
(DGH), for discharging the regulatory functions of leasing and licensing, safety and
environment as also development, conservation and reservoir management of Hydrocarbon
resources. Accordingly, DGH was set up by a Government Resolution in April, 1993 through
which certain advisory regulatory roles were entrusted but no development role was
assigned. OIL also went overseas and acquired a 20 per cent participating interest in the
production sharing contract for the Block 4 in Oman through a farm in agreement with
TOTAL FINA of France. It also involved in the exploration service contract for the Farsi
Block in Iran along with OVL and Indian Oil Corporation Limited. In 1997 the GoI in order
to accelerate pace of exploration efforts in the country approved the New Exploration
Licensing Policy (NELP) by providing a number of attractive fiscal and contractual terms.
The 9th rounds of NELP have been concluded, out of the 254 blocks awarded under NELP 1-
9 rounds, 54 blocks have been relinquished till date and balance of 181 blocks are active.
5.4.1. Crude Oil and Natural Gas Production in India. The trend in production of crude oil
and natural gas during the period 2003-04 to 2010-11 is in Table-5.4.1 and Figure-5.4.1. The
crude oil production has remained in the range of 33 to 34 MMT during the period 2002-03
to 2009-10. However, during 2010-11 the production of crude oil increased from33.69 MMT
during 2009-10 to 37.712 MMT due to production from Rajasthan oil fields. Natural gas
production increased substantially from 31.389 BCM in 2002-03 to 52.222 BCM in 2010-11,
with some major discoveries by Pvt. /JVCs in Krishna 53 Godawari deep water; there was
an increase by 11.94% over the year 2009-10 in production of crude oil in 2010-11. The
Government of India launched the ninth bid round of New Exploration Licensing Policy
(NELP-IX) and fourth round of Coal Bed Methane Policy (CBMIV) during October, 2010 to
enhance the countrys energy security. In addition, overseas oil and gas production in 2011-
12 is likely to be about 7 MMT and 2 BCM per annum respectively
HISTORY OF OIL PRICING:
Until the beginning of the 1970s energy and Oil market development was described by the
ascending branch with accelerated growth of Hubberts curve. Production growth was based
on the discovery of major new low-cost oil fields primarily in the Middle East. The
international market was closed to any outsiders; first split between the Seven Sisters under
the 1928 Achnacarry Agreement and by the end of the 1960s increasingly dominated by
OPEC, especially after re-nationalization of their resources in the mid-1970 s following the
end of colonialism in the 1960s. However, the embargo in 1973 / 1974 and the oil price
increases in 1973 /1974 and 1979 / 1980 triggered investment in oil outside of OPEC, the
development of new technologies, oil substitution by other energies especially in power
generation, more efficient energy use, and substitution of energy by other productive
resources, firstly by capital. This finally led to the decrease of absolute volumes of world oil
consumption in the early 1980s and to the oil price collapse in 1985 / 1986, to more
competitive structures and finally to a liquid oil market. The development of the oil market,
its contractual structure and pricing mechanisms can be divided in four major time-periods
from a historical perspective. Different forms of oligopolistic pricing dominated during the
first three periods: prior to the 1970s, at the first two stages it was the oligopoly of
international oil companies (with the strong back-up of their home states), at the third stage-it
was the oligopoly of 13 major producer states (OPEC). It was only 62 after the oil price
collapse in 1986 that pricing set by an oligopoly was substituted by exchange based
pricing.
ROLE OF CRUDE OIL PRICE ON INDIAN ECONOMY:
Crude oil price is an important parameter for oil importing country like India; it has a bearing
on economy, because crude oil is the raw material for refinery. The domestic production
accounts for only 24 to 26% of total countrys crude oil demand; rest is to be met by
importing the crude. Indias huge dependence on imported crude oil makes it vulnerable due
to the shocks & disruptions in the Global Oil Market. Any sharp spike in oil prices in the
global market results in an unfavourable economic situation. The reasons for the same are
outlined below.
Rise in Cost of Imports: The first victim of rise in crude oil prices is the state
exchequer. Every increase of $1 per barrel in Indian crude basket prices pushes up the
annual oil import bill by $1.2 billion. The oil import bill of $140 billion is faced by
India in 2011-12.( Source: World Oil, August 2012/ vol.233 No.8, p-25). It also leads
to a faster depletion of Indias Foreign Exchange (FOREX) Reserves.
Widening of Trade Deficit: There is a sharp increase in Indias trade deficit. The steep
increase in imports due to high oil prices leads to a further widening of the trade
deficit.
Increase in Oil Under Recoveries: As the pricing of Diesel, LPG & Kerosene is still
under government control; any rise in international oil prices is not reflected in the
domestic market. The inability of OMCs to sell fuel at the market defined rate results
in higher under recoveries. OMC have reported under recoveries totaling Rs.
1,385,410.00 million for the Financial Year 2012. ( ONGC, Annual Report 2011-12,
P-96).
Mounting Fuel Subsidy Burden: Any hike in price of imported crude oil is absorbed
by the OMCs along with the Upstream Oil Companies & the federal government. The
fuel subsidy bill has witnessed a continuous rise for the past few years. Governments
fuel subsidy bill amounts to US $ 9 billion during 2010- 11 (International Institute of
Sustainable development, iisd, Fuel Subsidies in India, 14th Aug 2012).
Worsening Fiscal Deficit: Indias Fiscal Deficit for 2009-10 stood at 6.6 % of Gross
Domestic Product (GDP). Rise in crude oil prices worsens the situation as
Government has to shell out more money in the form of fuel subsidy to OMCs. High
subsidies are putting pressure on fiscal deficit which has touched 5.9 % of GDP in
2011-12 and Govt. has targeted to bring it down to 5.1% in 2012-13.
Reduced Amount for Infrastructure Investment: India aims to invest $1 Trillion in
infrastructure development during the 12thFive Year Plan (2012-17). High prices of
crude oil (leading to higher fuel subsidy & increase in fiscal deficit) have the potential
to derail the governments plans as they eat into the amount of disbursal available
with the government for infrastructure &social development schemes. A continuous
rise in the subsidy bill & worsening fiscal deficit has forced the federal government to
deregulate the petrol prices in the domestic market while in-principle approval has
been given for deregulation of diesel prices. However, the Government reserves the
right to intervene whenever the situation demand.
CHAPTER 2
Research comprises "creative work undertaken on a systematic basis in order to increase the
stock of knowledge, including knowledge of humans, culture and society, and the use of this
stock of knowledge to devise new applications."]It is used to establish or confirm facts, reaffirm
the results of previous work, solve new or existing problems, support theorems, or develop
new theories. A research project may also be an expansion on past work in the field. To test the
validity of instruments, procedures, or experiments, research may replicate elements of prior
projects, or the project as a whole. The primary purposes of basic research (as opposed to applied
research) are documentation, discovery, interpretation, or the research and development (R&D)
of methods and systems for the advancement of human knowledge. Approaches to research
depend on epistemologies, which vary considerably both within and between humanities and
sciences. There are several forms of
research: scientific, humanities, artistic, economic, social, business, marketing, practitioner
research, life, technological, etc.
Research Methodology
A methodology does not set out to provide solutions - it is, therefore, not the same as a method.
Instead, a methodology offers the theoretical underpinning for understanding which method, set
of methods, or best practices can be applied to specific case, for example, to calculate a specific
result.
1. "the analysis of the principles of methods, rules, and postulates employed by a discipline"
2. "the systematic study of methods that are, can be, or have been applied within a
discipline"
Research can be classified in many different ways on the basis of the methodology of
research, the knowledge it creates, the user group, the research problem it investigates
etc,.
1. Basic Research- This research is conducted largely for the enhancement of knowledge,
and is research which does not have immediate commercial potential. The research which
is done for human welfare, animal welfare and plant kingdom welfare. It is called basic,
pure, fundamental research. The main motivation is to expand man's knowledge, not to
create or invent something
4. Survey Research- Surveys represent one of the most common types of quantitative,
social science research. In survey research, the researcher selects a sample of respondents
from a population and administers a standardized questionnaire to them. The
questionnaire, or survey, can be a written document that is completed by the person being
surveyed, an online questionnaire, a face-to-face interview, or a telephone interview.
Using surveys, it is possible to collect data from large or small populations (sometimes
referred to as the universe of a study).
Out of all these types of research, the research that is done by me is Survey Research
PART C- OBJECTIVES
To study and formulate the impact of crude oil prices on the whole sale price index of Indian
economy.
To study the waves of inflation rate (consumer price index) due to change in crude oil prices on
the GDP growth of Indian economy.
To examine and understand the direction of causality and to ascertain the causal relation and
linkage between differential change rate of crude oil prices and Inflation , also between inflation
vis--vis GDP growth of Indian economy.
To study the impact of energy price relative to the productivity of capital and labor of Indian
industries based on the past data.
PART D- HYPOTHESIS
Hypothesis
1. Crude oil price plays an insignificant role in rising WPI of Indian economy.
Crude oil price plays a significant role in rising WPI of Indian economy.
2. The role of Inflation is insignificant for declining GDP growth of Indian economy.
The role of Inflation is significant for declining GDP growth of Indian economy.
3. Crude oil price rate change does not Granger cause inflation.
5. A rise in the price of energy relative to output does not lead to decline in productivity of
existing capital and labor.
PRIMARY DATA
It refers to first hand information which is collected to solve a specific problem. Primary data is
collected by interviewing respondents by building a questionnaire and getting required response.
SECONDARY DATA
It refers to readily information available data from published or printed sources. It is normally
used in the case of academic research and to a certain extent in case of social research.
Sample size determination is the act of choosing the number of observations or replicates to
include in a statistical sample. The sample size is an important feature of any empirical study in
which the goal is to make inferences about a population from a sample. The sample size of my
research is 50.
PART G- LIMITATION OF STUDY
The limitations of the study are those characteristics of design or methodology that impacted or
influenced the interpretation of the findings from your research. They are the constraints on
generalizability, applications to practice, and/or utility of findings that are the result of the ways
in which you initially chose to design the study and/or the method used to establish internal and
external validity.
3. Sample size is very limited because of which conclusions drawn are not accurate and
does not cover the full population.
4. Purpose of the study had to be explained to the respondents because of which responses
may be biased.
PART H REVIEW OF LITREATURE
Oil prices matter to the health of an economy, despite a consistent fall in global oil intensity;
crude oil remains an important commodity and events in the oil market and continues to play a
significant role in shaping global economic and political development. Crude oil is the world
economys most important source of energy and is therefore, critical to economic growth. The
price of crude in global market is essentially driven by supply and demand. The performance of
world economy in general and the worlds largest economies such as US, Japan and recently
China have a significant impact on the demand for crude oil and vice versa. The various method
developed by IMF, World Bank(WB) and OECD have estimated that 10 dollar increase in crude
oil prices would lead to a decline of world production of goods and services by 0.5%. The world
economic growth and world oil demand are moving in tandem and there is high correlation
between world economic growth and demand for oil. It is essentially the supply that drives the
prices of crude oil. Many researchers agree in opinion that no other economic event in post-
World War II era generated as much attention as the series of oil price shocks, mainly produced
by OPEC countries. No studies were necessary to see the clear relationship between oil prices
and main economic indicators. Nevertheless, this issue was new and researchers posed such a
question as the numerical impact of oil shocks and their correlation with the policy conducted by
government in order to predict the best instrument to cope with the negative impacts caused by
oil price increases. Since then a large number of studies have reported a correlation between
increases in oil prices followed by economic downturns. Hamilton (1983) investigated the
impact on the US economy. His evidence suggests that crude oil prices have a strong relationship
with the US business cycle and tends to highlight cost-push inflationary effects, while the
research of 11 Berndt and Wood (1975,1979) as well as Wilcoxs (1983) indicates the
complementarily between energy prices and capital in the US economy is rather strong, both
before and after 1973. Hence, oil price rise lead to shocks may have a stronger effect than
generally believed. These results were later extended by Mork (1989) and Hooker (1999) who
argued that asymmetric and nonlinear transformations of oil prices restore that relationship, and
thus the economy responds asymmetrically and nonlinearly to oil price shocks. Later Hamilton
(2000) reported clear evidence of nonlinearity-oil price increases is much more important than
oil price decreases. An alternative interpretation was proposed based on the estimation of a linear
functional form using exogenous disruptions in petroleum supplies as an instrument. His study
shows that oil shocks play a crucial role in determining macroeconomic behavior because they
disrupt spending by consumers and firms. Hamilton extended his research work (2003, 2005, and
2009) and has presented empirical evidence suggesting that oil price shocks have been one of the
main causes of recessions in the United States. Others, including Barsky and Kilian (2004), argue
that the effect is small and that oil shocks alone cannot explain the U.S. stagflation of the 1970s.
Taking a more intermediate position, Bernanke et al. (1997) argue that an important part of the
effect of oil price shocks on the U.S. economy results not from the change in oil prices per se,
but from the resulting tightening of monetary policy. In the same line of research, Blanchard and
Gali (2007) present evidence showing that the dynamic effect of oil shocks has decreased
considerably over time, owing to a combination of improvements in monetary policy, more
flexible labor markets, and a smaller share of oil in production. Their results indicate that a 10
percent increase in the price of oil would, prior to 1984, have reduced U.S. GDP by about 0.7
percent over a 23 year period, while after 1984 the loss would be only about 0.25 percent. In
contrast to the extensive literature on the impact of oil prices on the U.S. economy, there has
Outside the U.S., studies of the relationship between oil prices and the macro-economy have
almost exclusively been confined to other 12 OECD members, with results suggesting that they
tend to be affected in broadly the same way as the U.S. but less strongly. Rasche and Tatom
(1977 and 1981) explain that energy price shocks alter the incentives for time to employ energy
resources and alter their optimal methods of production. Energy -using capital is rendered
obsolete by any energy price increase and the optimal usage of the existing stock is altered and
production switches to less energy- intensive technologies. The reduced capacity output of the
economy is usually referred to as decline in potential or natural output. The authors state that
domestic aggregate demand is affected due to a change in net imports of oil. The direction and
extent of effects depends on the countrys net oil export status. Net oil exporting countries
experience an increase (decrease) in aggregate demand when oil price rise (fall). The effect on
net oil importing countries is exactly opposite. Net oil exporting countries like Canada and the
UK receive a boost to aggregate demand and output/ employment from a spike in oil price. The
impacts on productivity tend to work in the same direction regardless of the oil trade status of the
country. An increase in oil prices has a negative impact on productivity. The theories suggest that
energy price shocks should affect the productivity of capital and labor resources. Rati Ram and
David Ramsey (1989) also took a production function approach (Cobb-Douglas specification) to
estimating the elasticity. Their estimates for the United States are somewhat unique in that they
distinguish between privately owned and publicly owned capital. A relative energy price variable
is also incorporated and the estimation period is from 1948 to 1985. They obtained statistically
significance energy price GNP elasticity estimates that ranged between -0.074 and -0.069,
depending on the disaggregation of public capital. 13 Micha Gisser and Thomas Goodwin (1986)
estimated equations involving real GNP, general price level, unemployment rate and real
investment. They regressed each of those variables independently on contemporaneous and four
lags of M1money supply, the high employment federal expenditure measure of fiscal policy and
the nominal price of crude oil. BAIC Economic Review Autumn 2006 (The business and
industry advisory committee to the OECD), it has shown that the world economy slows down
based on the BAIC Member Survey and at that time it was anticipated that the OECD wide real
GDP growth to drop from 3.1 % to 2.6% in 2007 and risk for growth was associated to oil price.
Hyun Joon Chang of Korea Energy Economics Institute in his paper The Impact of Oil Price
Increase on the Global Economy discussed the impact of an oil price increase of $5 per bbl on
global economy (IMF -2000). In the case of oil price increases, there will be a transfer of income
from oil consumers to oil producers. On an international level, the transfer is from oil importing
countries to oil exporters, and oil exporters tend to expand demand only gradually. It will affect
income redistribution of the global economy. Also, when oil prices increase and energy input
prices rise, there will be a rise in the production costs in the economy, depending on degree of
competition of the markets. As the oil intensity of production in developed countries has fallen
over the past three decades, the cost side impact of increases in oil prices can be expected to be
less than in past oil price increases. In developing countries, however, where the oil intensity of
production has declined less, the impact may be closer to that in the earlier period. There will be
a demand side impact of oil price increases. When oil prices rise, consumers are likely to delay
or postpone their purchasing durables such as automobiles. This demand side impact leads to
relative increase in inventories to sales and then decline industrial production. 14 Finally,
depending on expected duration of price increases, the change in relative prices creates
incentives for suppliers of energy to increase production and investment, and for oil consumers
to economize. The impact on developing countries seems to be at least as large as for many of
the industrial countries. Oil exporting countries suffered seriously from the oil price decline in
1997-98 are expected to benefit substantially with recent oil price increases. On the other hand,
there is a negative impact on oil importing countries, especially as dependency on oil has not
fallen to the same extents as in industrial countries. Oil price increases affect developing
countries very differently. Oil exporting countries such as UAE have a large current account
surplus while many oil importing countries are expected to be adversely affected. The oil price
increase would add to its current account deficit by 1.25 percent. A number of countries also face
additional pressures from weak non-oil commodity prices, and have limited access to capital
markets, which will further increase the adverse impact on domestic absorption. In major
emerging market economies, the results vary widely by region, depending on the relative size of
oil importing to exporting countries. Asia experiences the largest negative impact on growth.
Latin America, emerging Europe and Africa are less adversely affected by the oil shock. Among
the oil importing countries, the largest impact on GDP growth and the balance of payments is
expected to be in India, Korea, Pakistan, Philippines, Thailand, and Turkey. The oil price
increases will affect Chinas economic recovery, yet the direct impact of oil price hikes on
Chinas economy should be much less than that on most Asia-Pacific countries as the ratio of net
oil imports to domestic oil consumption is much lower than the Asian average. The ratio for
China is 22 percent, but 100.2 percent for Japan and 61.4 percent for the rest of Asia Pacific.
Also, oil occupies only 26.6 percent in Chinas primary energy consumption, much lower than
other Asian countries, which are heavily dependent on oil. Analysis of the impact of high oil
prices on the global economy by Economic Analysis Division, International Energy Agency
reports in Energy Prices and 15 Taxes, 2nd Quarter 2004, wherein it has shown that the
vulnerability of oil importing countries to higher oil prices varies markedly depending on the
degree to which they are net importers and oil intensity of their economies. According to the
results of a quantitative exercise carried out by the IEA in collaboration with the OECD
Economics Department and with the assistance of the International Monetary Fund Research
Department, a sustained for10 per barrel increase in oil price from $25 to $35 would result in the
OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. Inflation
would rise by half a percentage point and unemployment would also increase. The OECD
imported more than half its oil needs in 2003 a cost of over $260 billion-20% more than 2001.
Euro-zone countries, which are highly dependent on oil imports, would suffer most in short term,
their GDP dropping by 0.5% and inflation rising by0.5% in 2004. The U.S would suffer the least,
with GDP would fall 0.4%, with its relatively low oil intensity compensating to some extent for
its almost total dependence on imported oil. In all OECD regions, these losses start to diminish in
following three years as global trade in non-oil goods and services recovers. This analysis
assumes constant exchange rates. The adverse economic impact of higher oil prices on oil-
importing developing countries is generally even more severe than for OECD countries. This is
because their economies are more dependent on imported oil and more energyintensive, and
because energy is used less efficiently. On average, oil-importing developing countries use more
than twice as much oil to produce a unit of economic output as do OECD countries. Developing
countries are also less able to weather the financial turmoil wrought by higher oil import costs.
India spent $15billion, equivalent to 3% of its GDP, on oil import in 2003. This is 16% higher
than its 2001 oil import bill. It is estimated that the loss of GDP average 0.8% in Asia and 1.6%
in very poor highly indebted countries in the year following a $10 oil-price increase. The loss of
GDP in Sub-Saharan African countries would be more than 3%. 16 World GDP would be at least
half of one percent lower equivalent to $255 billion- in the year following a $10 oil price
increase. This is because the economic stimulus provided by higher oil export earnings in
OPEC and other exporting countries would be more than outweighed by depressive effect of
higher prices on economic activity in the importing countries. The transfer of income from oil
importer to oil exporter in the year following the price increase would alone amount to roughly
$150billion. A loss of business and consumer confidence, inappropriate policy responses and
higher gas prices would amplify this economic effect. For as long as oil prices remain high and
unstable, the economic prosperity of oil-importing countries-especially the poorest developing
countries-will remain at risk. World Economic Outlook April-2007 reports there is a global
macroeconomic implications of a supply induced oil price hike and persistent productivity
shocks with low oil capacity. In fiscal 2010, the Indias import bill for crude oil was
$100.08billion, which of 7.12% higher in volume than fiscal 2009, crude oil import bill increased
to around $ 20.527billion. That means there was a jump of 25.8% in crude oil import bill for
fiscal 2010 from previous fiscal 2009 i.e. $79.553billion. 2.1. Gap Analysis Crude oil prices
played a critical role in substantially reducing economic growth in any economy whether it is
developed or developing economy. Worldwide demand for crude oil arises from demand for the
refined products that are made from crude; and changes in crude oil prices are passed on to
consumers in the prices of the final petroleum products. When the prices of petroleum products
increase, consumers use more of their income to pay for oil-derived products, and their spending
on other goods and services declines. The extra amount spent on those products is basically go to
foreign oil producers as India is net importer of oil. 17 Oil is a vital input for the production of a
wide range of goods and services, because it is used for transportation in business of all types.
Higher oil prices thus increase the cost of inputs; and final product price increases cause
inflation, if the cost increases cannot be passed on to consumers, economic inputs such as labor
and capital stock may be reallocated. Higher oil prices can cause worker layoffs and the idling of
plants, reducing economic output in the short term. In a net importer of oil economy like India,
higher oil prices shrink foreign reserves of the economy, affect the purchasing power of the
economy in terms of International trade. The increased price of imported oil forces the
businesses to devote more of their production to exports, as opposed to satisfying domestic
demand for goods and services, therefore cause inflation, even if there is no change in the
quantity of foreign oil consumed. Higher oil prices cause, to varying degrees, increases in other
energy prices. Depending on the ability to substitute other energy sources for crude the price
increases can be large and can cause macroeconomic effects similar to the effects of oil price
increases. Thus, though energy is the prime mover in an economy, the demand and supply gap of
crude oil must be bridged through import to meet the countrys requirement, hence, crude oil
price is an important parameter in determining reserve position and trade balance and finally
balance of payment. Inflation is also an important area arising with the increase of crude oil
prices, with the increase of inflation, capacity to purchase is reduced and expenditure increases,
saving decreases, ultimately slows down the business and economic activities thus slows down
GDP growth.
CHAPTER 3
DATA ANALYSIS
20
18
16
14
12
10
0
Male Female
63% of the respondents were females compared to 37% males, as they have more time to spare
than the working husbands.