ECONOMIC REFORMS AND PRODUCTIVITY GROWTH IN INDIAN MANUFACTURING SECTOR – AN INTER STATE ANALYSIS (original) (raw)
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SSRN Electronic Journal, 2013
The extent to which Indian organized manufacturing performance changed after the Economic Reform of 1991 has been an important question among empirical analysts. Using input-output data from the Annual Survey of Industries for the period 1970-71 through 2007-08, this paper compares the pre-and post-reform performances of Indian manufacturing in terms of total factor productivity growth. We use the non-parametric method of Data Envelopment Analysis to construct the Biennial Malmquist Index of total factor productivity for Indian states to determine if the states have experienced improvement in manufacturing productivity during the post-reform years. Results show that at the all-India level, total factor productivity growth rate in manufacturing is higher during the post-reform period. Although the majority of states experienced accelerated productivity growth, some states experienced declines in productivity after the reforms. However, the regional variation in the rates of productivity change diminished during the post-reform years. A non-parametric decomposition of the Malmquist productivity index into its components shows that both before and after the reforms technological progress was the most important component of the manufacturing growth process
Productivity Change in Indian Manufacturing: A Comparison of Pre Reform and Post Reform Period
ANUSANDHAN – NDIM's Journal of Business and Management Research
The economic reforms were initiated in 1991 as part of the structural adjustment programme in India. It constituted of the three-pronged approach of Liberalization, Privatization and Globalization to boost investment, production and productivity in the economy. This paper attempts to analyse the trend of, technical efficiency, technological change and TFP growth in the Indian manufacturing sector during 1981-82 to 2011-12. The period up to 1990-91 is considered as pre-reform while the subsequent period is regarded as post-reform. The data used in this study for calculating productivity and its various components have been sourced from the Annual Survey of Industries (ASI) for the relevant years. The manufacturing sector is modelled as an industry producing a scalar output measured by the gross value added at constant prices by employing two-factor inputs namely labour and capital. Data Envelopment Analysis based Malmquist Index has been calculated to arrive at the estimates of techn...
Total Factor Productivity Growth of Indian Manufacturing: An Analysis of after Liberalization
Asian Journal of Research in Social Sciences and Humanities, 2015
This paper will try to develop an analytical framework and employs it to empirically test if liberalization reforms in the Indian manufacturing sector has raised total factor productivity (TFP) growth. In this paper, we would also examine the technical efficiency and technical change in the manufacturing sector. Finally, the paper would conclude with some general observations and suggestions. Firm level performance in the manufacturing sector will be measured in the form of productivity growth in the present study. In the last two decades, the productivity growth measurement literature has been extended from the standard calculations of TFP employing production function framework towards more refined decomposition methods. To overcome the shortcomings of the growth accounting approach and to identify the components of productivity change, techniques have been developed that are based on the decomposition of TFP index. Malmquist index will be used for measuring the Total Factor Productivity. Finally, the paper would conclude with some general observations and suggestions.
International Journal of Business Analytics and Intelligence, 2020
The study estimates and decomposes the sources of total factor productivity growth (TFPG) of the 2-digit manufacturing industries as well as total manufacturing industry in 15 major industrialized states in India as well as in All-India during the period from 1981-82 to 2010-11 (total study period), pre-reform period (1981-82 to 1990-91), post-reform period (1991-92 to 2010-11) and for two decades of the post-reform period (i.e., 1990-91 to 2000-01 and 2001-02 to 2010-11), using stochastic frontier production function. The methodology necessitates decomposition of the sources of TFPG into technological change, technical efficiency change, allocation efficiency change and scale change. The main findings of our decomposition are that the growth rates of TFP in most of the 2-digit industries in the major industrialized states in India as well as in All-India have declined during the post-reform period. Also, this decline in TFPG is mainly accounted for by the decline in technical efficiency change and allocation efficiency effect that happened during that period. With respect to scale effect, its contribution to TFPG in the 2-digit industries in the major industrialized states has become very negligible although the manufacturing industries of different states under study and India as a whole have benefitted from economies of scale. The behaviour of the allocation efficiency component clearly indicates inefficient resource allocation in almost all the 2-digit industries under study during the post-reform period. This implies that liberalization of the economy during the post-reform period has increased the price distortion measured by the gap between price and marginal cost of the product of 2-digit manufacturing industries in the major industrialized states in India and in All-India as well. However, the rates of technological progress of almost all the 2-digit industries in most of the states under study have increased. Notwithstanding, as the combined effect of technical efficiency change and allocation efficiency change of these industries outweigh the joint effect of scale change and technological change of the same, TFPG of these industries has declined during the post-reform period.
Growth and spread of manufacturing productivity across regions in India
SpringerPlus, 2013
An expected outcome of economic reforms in India is enhanced pace of industrialization with manufacturing sector playing a crucial role by increasing its share in output via higher investments and increased productivity. This process of industrialization was also expected to usher in possibilities for the slow growing states to catch up with the fast growing ones. This paper assesses the extent of regional manufacturing performance in India by analyzing the trends in labour and total factor productivity for the organized manufacturing sector of 15 major Indian states. Data Envelopment Analysis is used to compute Malmquist total factor productivity index and its components. The results indicate that labour productivity diverges in the reform era and its growth and TFPG follow more or less a similar pattern. The study also finds that growth in productivity vary considerably across states and this variation in productivity growth can be explained, to a great extent, by differences in i...
Looking Beyond the Methods: Productivity Estimates and Growth Trends in Indian Manufacturing
SSRN Electronic Journal, 2009
Studies on Indian manufacturing have been unable to provide consistent estimates of productivity and its growth rates. This paper performs detailed and exhaustive set of accounting exercises for the period 1970-2003 using production function, index number and envelopment analysis methods. TFP growth rate average is 1.1% for both gross output based and net value added based measures. In gross output production, share of materials is 0.6, much larger than the capital and labor shares. Share of capital is constantly increasing. For the period just after the reforms (1991-1997), input growth jumps but TFP growth is negative. But after 1998, the trend reverses and output grows slowly despite negative input growth due to large TFP growth. Aggregated TFP growth rates (Domar-weighted and Fisher index) also follow the same pattern; showing upward trends after mid-1990s. There are no significant differences in TFP growth rates among different-sized firms. After the reforms, TFP growth increases substantially in the public corporations. Productivity transition seems to be random across different (3-digit NIC code) industries. Industries with focus towards services experienced higher productivity growth than others. These results show that the lack of productivity growth was the reason for unimpressive performance of Indian manufacturing earlier.
Productivity Growth of Indian Manufacturing Firms in an Era of Economic Reforms : A Review
This article provides an overview of recent studies on productivity growth of Indian manufacturing firms in the post-1991 period. The central question is whether there has been a significant acceleration in productivity growth rates of manufacturing firms in India in an era of economic liberalization. This article has observed that impact of economic reforms is not uniform across all sectors. Studies have shown that factors like import of disembodied technology, availability of wider varieties of imported inputs, foreign investment, change in market structure and R&D intensity are significant determinants for productivity growth in the post-reform period.
PRODUCTIVITY TRENDS IN ORGANISED MANUFACTURING SECTOR IN INDIA
The paper provides estimates of labour productivity, capital productivity, total factor productivity(TFP) and parametric estimates of productivity using production functions with a view to compare pre-reform estimates with post reforms period in Indian Manufacturing Industries from 1973-74 to 2004-05. The result shows significant increase in labour productivity, capital intensity and stagnant capital productivity. The growth in productivity has been more in pre-reform period (1973-74 to 1990-91) as compared to post reform period (1991-92 to 2004-05). The labour productivity has increased at the rate of 4.34 percent and 4.35 percent in pre-reform and post reform period showing no significant difference but the capital productivity has shown declining trend in post-reform period (1.87%) as a result of this the TFP increase in post reform period was insignificant (0.63%) as compared to pre-reform period (1.52%). We find significantly higher increase in capital intensity in post-reform period (6.22%) as compared to pre-reform period (4.39%).
The Indian Economic Journal, 2011
The paper measures Malmquist Productivity Index (MPI) of Total Factor Productivity Growth (TFPG) of 14 manufacturing industries using non-parametric Data Envelopment Analysis (DEA), considering three-digit Annual Survey of Industries data of West Bengal as a case study. Decomposition of MPI reveals that technical change is the prime source of productivity increase and taking all the industries together, the average TFPG is exhibited as 3.38 per cent per annum. Second-stage regression analysis highlights absence of unanimous relationship within industry groups. Individual TFPG varies with industry-specific characteristics like firm size, capital-labour ratio, employees per production worker, real wage and its change. Tradeliberalisation, as reflected through lowering of tariff and relative adjustment of real effective exchange rate, has contributed positively to TFPG. The study highlights the need for adopting industry-specific policies for fostering TFPG.