IDEAS home Printed from
   My bibliography  Save this article

Indian Manufacturing Productivity: What Caused the Growth Stagnation before the 1990s?


  • Abhay Gupta



This article addresses the question of why productivity growth in Indian manufacturing was slow in the pre-reform period and analyzes how economic reforms in the 1990s accelerated productivity growth. The answer lies in two subtle but important distortion-inefficiency mechanisms, which affected productivity growth by distorting intermediate input allocation. The interaction of quantitative restriction policies and inflexible labour laws resulted in lower than optimal materials per worker usage. The combination of high inflation and unavailability of credit exacerbated this factor distortion and lowered productivity growth further. Using a panel dataset on Indian industries, this article finds widespread underutilization of materials compared to labour until recently, and this sub-optimal materials per worker usage lowered productivity growth.

Suggested Citation

  • Abhay Gupta, 2010. "Indian Manufacturing Productivity: What Caused the Growth Stagnation before the 1990s?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 20, pages 85-102, Fall.
  • Handle: RePEc:sls:ipmsls:v:20:y:2010:5

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    Full references (including those not matched with items on IDEAS)

    More about this item


    productivity; growth; materials; labour; quotas; labour laws; public policy; India;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sls:ipmsls:v:20:y:2010:5. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CSLS). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.