ABSTRACT
This chapter presents a brief overview of the macroeconomic modelling efforts in India in order to highlight the important contribution in the context of earlier macro modelling studies. It attempts to build a macro econometric model that incorporates the behavioural and regional differences in the economy. The basic macro economic framework that is adopted in the various studies is to begin with modeling the components of aggregate demand such as consumption, investment, government expenditures, exports and imports. The chapter discusses the disequilibrium approach to modelling the production process in the present study. Production function is traditionally estimated as an average output response to a given level of inputs and technology, though theoretically it is defined as the maximum possible. State level data on inputs and crop output over time are the basis for the estimation of production frontier and production efficiencies. It addresses the problem of interdependence of the independent variables in the regression models by careful diagnostic tests.
