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Did India's Economic Reforms improve Efficiency and Productivity? A Nonparametric Analysis of the Initial Evidence from Manufacturing

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  • Subhash C. Ray

    (Department of Economics, University of Connecticut, Storrs CT 06269-1063, USA)

Abstract

In this paper, state-level input and output quantity data constructed from the Annual Survey of Industries, for the period 1986-7 through 1995-6 are analysed, to measure levels of technical efficiency for each state, for each of the sample years using the non-parametric method of Data Envelopment Analysis (DEA). The resulting information is used to examine (i) whether the post-reform years show any improvement in efficiency compared to the years prior to the reforms and (ii) which of the states have shown the most gain in efficiency. We also measure both Tornqvist and Malmquist indexes of multi-factor productivity for each state for individual years treating the preceding year as the base. This permits us to compare the average annual rates of multi-factor productivity growth before and after the reform. Both measures show that, on average, the annual rate of productivity growth has been higher in the post-reform period than in the pre-reform years. However, some states have actually experienced a slowdown in the productivity growth or even productivity decline after the reforms. Decomposition of the Malmquist productivity index shows that improvement in technical efficiency as well as faster rates of technical progress contributed to the observed acceleration in the growth rate. A subsequent regression shows that there is a tendency towards convergence in productivity growth rates across states.

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Bibliographic Info

Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

Volume (Year): 37 (2002)
Issue (Month): 1 (January)
Pages: 23-57

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Handle: RePEc:dse:indecr:v:37:y:2002:i:1:p:23-57

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Related research

Keywords: Total Factor Productivity; Tornqvist Index; Fisher Index; Data Envelopment Analysis;

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Cited by:
  1. Kumar, Surender & Managi, Shunsuke, 2012. "Productivity and convergence in India: A state-level analysis," Journal of Asian Economics, Elsevier, vol. 23(5), pages 548-559.
  2. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.
  3. Subhash C Ray & Mainak Mazumdar & Meenakshi Rajeev, 2010. "Sources of Heterogeneity in the Efficiency of Indian Pharmaceutical Firms," Working Papers id:3334, eSocialSciences.

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