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

Author

Listed:
  • 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.

Suggested Citation

  • Subhash C. Ray, 2002. "Did India's Economic Reforms improve Efficiency and Productivity? A Nonparametric Analysis of the Initial Evidence from Manufacturing," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 37(1), pages 23-57, January.
  • Handle: RePEc:dse:indecr:v:37:y:2002:i:1:p:23-57
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    Citations

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    Cited by:

    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. 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.
    3. Mazumdar, Mainak & Rajeev, Meenakshi & Ray, Subhash C., 2012. "Sources of Heterogeneity in the Efficiency of Indian Pharmaceutical Firms," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 47(2), pages 191-221.
    4. Tantri, Malini L., 2014. "Promises and paradoxes of SEZs expansion in India," Working Papers 331, Institute for Social and Economic Change, Bangalore.
    5. repec:ind:nipfwp:22 is not listed on IDEAS
    6. repec:eee:ecmode:v:70:y:2018:i:c:p:447-457 is not listed on IDEAS
    7. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.
    8. repec:npf:wpaper:22 is not listed on IDEAS
    9. Subhash Ray & Anasua Bhattacharya, 2003. "Surplus Labor in Indian Manufacturing: Evidence from the Annual Survey of Industries," Working papers 2003-14, University of Connecticut, Department of Economics.

    More about this item

    Keywords

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

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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