Comparative Performance of the Indian Apparel Firms

This paper examines the relative performance of 38 Indian apparel firms for the year 2007 using multiple input-output evaluation method. The study is based on the cross-sectional as well as panel data collected from the CMIE PROWESS database. A nonparametric method, known as Data Envelopment Analysis (DEA) is applied under input orientation assumption. Net fixed asset, raw material, power and fuel, and wages and salaries are selected as inputs and value of gross sales as the output variable. The main objectives are to identify the relatively efficient and inefficient firms; set the peer firms for the inefficient firms and suggest alternative actions that would make inefficient firms relatively efficient. Further, the study also examines the trend in technical and scale efficiencies, using a five-year panel data (2003-2007) for a set of 24 apparel firms. The paper finds that on average the apparel industry could make a 33% radical reduction in its inputs to produce the same level of output. The time series analysis reveals that the efficiency scores vary significantly across years and scale efficiency trend indicates that the number of firms operating under Decreasing Returns to Scale (DRS) have increased. The paper also suggests input targets for the inefficient firms to improve their relative performance.