ABSTRACT
Prior to the 1990s, the structure of the Indian economy was mostly a closed, regulated and protectionist economy; even after gaining independence. As a result, the performance of various sectors and the aggregate growth rate was not impressive, as the economy experienced a number of obstacles and interruptions. However, during 1990s, the economy had a major structural shift by adopting liberalization and globalization policies to become a market based economy. These policies allowed the economy to grow at an average of over 7 percent per annum since 1994 [9]. Driven by a sterling demographic dividend, diverse nature, continuing structural reforms and further globalisation,
in Bayesian
striving for higher growth. Hence, despite the recent slowdown due to the weak global economic environment, the prospects of India are still considered bright in the medium to long-run and it is considered as one of the fastest growing economies in the world. Various sectors including food processing, transportation equipment, petroleum, textiles, software, agriculture, mining, machinery, chemicals, steel, cement, among others, contributed to the economic growth of India. Among these, the agriculture, manufacturing and services sector are three major sources of economic growth over the years [18] and [66]. Over the last decade, the contribution of the services sector to overall growth of the economy is about 65%, while industry and agriculture contribute 27 percent and 8 percent, respectively [41]. However, the economy has slowed down currently, due to the slowing down of the global economy, weighed down by the crisis in the Euro Area and uncertainty about fiscal policy in the USA, while the domestic economy has also been affected by a weak monsoon [41]. Given the growing nature of the Indian economy and uncertainties in economic parameters, it is important to track the movement of vital economic and financial variables in the economy, as these may affect the forecasts of future economic activity.
