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Efficiency and Total Factor Productivity Growth in Indian Dairy Sector

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  • Ohlan, Ramphul

Abstract

This paper assesses the total factor productivity (TFP) growth and efficiency levels in the Indian dairy processing industry using the Tornqvist index and data envelopment analysis (DEA) models over the period 1980-2008. We utilize a different empirical approach and extend the data sets. To examine the nature of scale inefficiency, nonincreasing returns to scale DEA frontier is used. Our results suggest that total factor productivity in the Indian dairy processing industry has grown significantly. An average technical efficiency level of 72% which implies approximately a 38% inefficiency level is observed from the study. The decomposition of TFP growth indicates that growth is driven more by technical efficiency changes than by scale efficiency. Highest input slacks are observed for working capital. We note that a devaluation in terms of real effective exchange rate, profitability, export and import penetration and research stock play a significant role in explaining the productivity growth in the Indian dairy industry. The non-increasing returns to scale DEA frontier analysis suggests that on an average scale inefficiency is due to increasing returns to scale. Finally, it is noticed that in India, a high volume of milk does not reach to milk processing plants. It is suggested that for efficient utilization of existing processing capacity in dairy plants, a systematic investment is needed in logistics of raw milk collection and infrastructure development. The European model may be used as a benchmark in strengthening milk farmers for increasing farm size and building own processing capacity.

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  • Ohlan, Ramphul, 2013. "Efficiency and Total Factor Productivity Growth in Indian Dairy Sector," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 52(1), pages 1-27, February.
    • Handle: RePEc:ags:qjiage:155486
    DOI: 10.22004/ag.econ.155486
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    References listed on IDEAS

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    1. Henriques, C.O. & Gouveia, M.C., 2022. "Assessing the impact of COVID-19 on the efficiency of Portuguese state-owned enterprise hospitals," Socio-Economic Planning Sciences, Elsevier, vol. 84(C).
    2. CECHURA, Lukas & ZAKOVA KROUPOVA, Zdenka & MALY, Michal & HOCKMANN, Heinrich, 2015. "Scale Efficiency In European Pork Production," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 18(2), pages 1-6, October.
    3. Magdalena Kapelko, 2019. "Measuring productivity change accounting for adjustment costs: evidence from the food industry in the European Union," Annals of Operations Research, Springer, vol. 278(1), pages 215-234, July.
    4. Magdalena Kapelko & Alfons Oude Lansink & Spiro E. Stefanou, 2017. "Input-Specific Dynamic Productivity Change: Measurement and Application to European Dairy Manufacturing Firms," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(2), pages 579-599, June.
    5. Jindřich ŠPIČKA & Ondřej MACHEK, 2015. "Change in the production efficiency of European specialized milk farming," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(1), pages 1-13.
    6. Lal, P. & Chandel, B.S., 2017. "Total Factor Productivity in Milk Production in Haryana," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 30(2).

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