Macroeconomic Indicators of Selected Developed Nations and Its Influence on Indian Economy

Abstract

This study examines how macroeconomic indicators from the United States and Japan influence the Indian economy, emphasizing global financial interconnections. It focuses on key variables such as GDP growth, interest rates, inflation, and exchange rates, analyzing their effects on India’s FDI inflows, currency fluctuations, inflation, and monetary policy. The study finds a strong positive correlation between US interest rates and India’s FDI inflows, highlighting India’s attractiveness as an investment destination despite rising US rates, driven by structural reforms and economic growth. In contrast, Japan’s interest rate changes show a weak negative correlation with India’s FDI, indicating minimal impact due to Japan’s policy-driven investments. US GDP growth strengthens the Indian rupee, while Japan’s GDP growth contributes to rupee depreciation, likely due to trade imbalances and capital flows. US inflation significantly affects India’s inflation and monetary policy through capital movements and currency depreciation, while Japan’s inflation mainly impacts import-dependent sectors. Using a quantitative research design, the study employs regression analysis, correlation analysis, and the Augmented Dickey-Fuller Test (ADFT) on secondary data, offering insights for policymakers to mitigate external economic shocks.