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Economic Reforms and Total Factor Productivity Growth of Indian Manufacturing: An Inter-State Analysis

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  • Arnab K. Deb

    (University of Connecticut)

  • Subhash C. Ray

    (University of Connecticut)

Abstract

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.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2013-04.

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Length: 25 pages
Date of creation: Feb 2013
Date of revision: Apr 2013
Handle: RePEc:uct:uconnp:2013-04

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Related research

Keywords: Economic Reform; Total Factor Productivity; Data Envelopment Analysis; Biennial Malmquist Index;

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  1. Kumar, Surender, 2004. "Decomposition of total factor productivity growth: A regional analysis of Indian industrial manufacturing growth," Working Papers 04/22, National Institute of Public Finance and Policy.
  2. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  3. Devashish Mitra & Beyza Ural, 2009. "Indian manufacturing: A slow sector in a rapidly growing economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(1), pages 205-205.
  4. Chris Milner & Dev Vencappa & Peter Wright, 2007. "Trade Policy and Productivity Growth in Indian Manufacturing," The World Economy, Wiley Blackwell, vol. 30(2), pages 249-266, 02.
  5. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  6. Ray, Subhash C & Desli, Evangelia, 1997. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries: Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1033-39, December.
  7. Pushpa Trivedi, 2004. "An Inter-State Perspective on Manufacturing Productivity in India: 1980-81 to 2000-01," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 39(1), pages 203-237, January.
  8. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 03/22, International Monetary Fund.
  9. Ray, Subhash C & Mukherjee, Kankana, 1996. "Decomposition of the Fisher Ideal Index of Productivity: A Non-parametric Dual Analysis of US Airlines Data," Economic Journal, Royal Economic Society, vol. 106(439), pages 1659-78, November.
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