Simply stated, econometrics means economic measurement. Although quantitative measurement of economic concepts such as the gross domestic product (GDP), unemployment, inflation, imports, and exports is very important, the scope of econometrics is much broader.

Econometrics makes use of economic theory, mathematical economics, economic statistics (i.e., economic data), and mathematical statistics. Yet, it is a subject that deserves to be studied in its own right for many reasons.

Econometrics gives empirical (i.e., based on observation or experiment)content to most economic theory.

For students majoring in economics and business there is a pragmatic reason for studying econometrics. After graduation, in their employment, they may be called upon to forecast sales, interest rates, and money supply or to estimate demand and supply functions or price elasticities for products.

It is fair to say that econometrics has become an integral part of training in economics and business.


How does one actually do an econometric study? Broadly speaking, econometric analysis proceeds along the following lines.

1. Creating a statement of theory or hypothesis

2. Collecting data

3. Specifying the mathematical model of theory

4. Specifying the statistical, or econometric, model of theory

5. Estimating the parameters of the chosen econometric model

6. Checking for model adequacy: Model specification testing

7. Testing the hypothesis derived from the model

8. Using the model for prediction or forecasting




Globalization is the major factor influencing the domestic financial markets. With deregulation of the financial markets taking place across the world; financial services, institutional framework and the nature & scope of financial instruments is undergoing rapid and dramatic changes. India with its comprehensive framework of financial institutions and instruments is emerging as a leading player in emerging market finance. However, a great scope exists to further expand the reach and competitiveness in business development and performance.

The Indian economy is estimated to have grown by 7.4 per cent in 2009-10.As per the Securities and Exchange Board of India (SEBI), number of registered Foreign Institutional Investors (FIIs) as on May 31, 2010 was 1710 and the cumulative investments in equity since November 1992 to May 31, 2010, was US$ 77.2 billion , while the cumulative investments in debt during the same period were US$ 13.4 billion . The total FII inflow in equity during January to May 2010 was US$ 4.6 billion while it was US$ 5.9 billion in debt. Net investment made by FIIs in equity between June 1, 2010 and June 14, 2010 was US$ 530.05 million while it was US$ 875.73 million in debt, as per the latest data released by SEBI.Private equity (PE) firms invested about US$ 2 billion across 56 deals during the quarter ended March 2010, according to a study by Venture Intelligence, a research service focussed on PE and merger and acquisitions (M&A) transaction activity in India. The amount invested during the January-March 2010 quarter was the highest in the last six quarters. The figure was significantly higher than that during the same period last year (January-March 2009) which witnessed US$ 620 million being invested across 58 deals and also the immediate previous quarter (October-December 2009) where investments worth US$ 1,681 million were made across 102 deals.Stock markets

According to data from Bloomberg, India’s market cap as a percentage of world market cap was 2.8 per cent as on December 31, 2009.

In 2009, there were 21 IPOs that raised US$ 4.18 billion as compared to 36 IPOs in 2008 that raised US$ 3.62 billion.

Further, according to ICICI Securities, Indian companies are likely to raise up to US$ 42.43 billion from the primary market over the next three years. According to Madhabi Puri-Buch, Managing Director and CEO, ICICI Securities’ nearly US$ 20 billion will be raised from the initial public offer (IPO) market this fiscal (2010-11), of which around US$ 8.49 billion would be from the public sector and an equal amount from private companies.


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