Determinants of Industrial Productivity in India before and after Liberalisation-An Application of Discriminant Function

Abstract

A well developed industrial sector covering various different areas is vital to economic development of a country. Since a variety of different industrial sectors are connected with each other thorough inter dependence of demand and supply, a well balanced industrial growth is at the centre of economic development. Estimation and analysis Productivity growth and productivity differential in manufacturing sector have been the most popular areas of applied economic research as it is based on the well-defined analytical framework of the standard economic theory of productivity. The reference period chosen for the study covers both pre and post liberalization period. The pre liberalization period covers between 1972-73 and 1990-91 and post liberalization period between 1991-92 and 2009-10. In this paper, a Discriminant Function Analysis is applied to find out the dominant factors which determine the productivity in manufacturing sector of Indian states. It was found that time factor was the first dominant factor to determine the pre and post liberalization period labour productivity. Both in the pre and post liberalization period capital productivity was dominated by wage rate. In determining the total factor productivity net value added was the prime factor between pre and post liberalization period.