Does Factor Accumulation or Productivity Change Drive Output Growth in the Indian Sugar Industry? An Inter-state Analysis

Nitin Arora,Sunil Kumar

doi:10.5709/ce.1897-9254.85

Nitin Arora, Sunil Kumar

Open Access

https://doi.org/10.5709/ce.1897-9254.85

Copy DOI

Abstract

The study endeavors to break down output growth in the Indian sugar industry into the ‘perspiration’ component that corresponds to factor accumulation and the ‘inspiration’ component that corresponds to the total factor productivity (TFP) growth. The bootstrapped Malmquist productivity index has been used as a technique to obtain the TFP growth from the period 1974/75 to 2004/05. Empirical analysis reveals that output growth in the Indian sugar industry is equally driven by the inspiration component (i.e., TFP growth) and the perspiration component (i.e., factor accumulation), but in opposite directions. The inspiration component is observed to contribute to output growth positively, whereas the perspiration component contributes negatively. Given substantial TFP growth, the potential output growth in the Indian sugar industry has been restricted primarily by the negative growth of inputs during the entire study period and particularly in the post-reform period.

Highlights

The present study has been undertaken with the primary objective of analyzing the sources of output growth in the Indian sugar industry at both national and regional levels
The decomposition of output growth in the Indian sugar industry reveals that the inspiration component of output growth (i.e., total factor productivity (TFP) growth) has a significant contribution; TFP has been growing at an average rate of 2.43 percent per annum
Inter-state analysis reveals that the output growth in the sugar industry of Orissa is growing, with the highest average annual growth rate of 3.634 percent

Summary

Introduction

The present study has been undertaken with the primary objective of analyzing the sources of output growth in the Indian sugar industry at both national and regional (i.e., state) levels. Even the states of Gujarat and Haryana, which experienced negative TFP growth during the entire study period, were found to be growing with positive rates of 3.76 and 0.47 percent, respectively, during the post-reform period. It is evident from the above analysis that the contribution of TFP growth in output growth relative to input growth is substantial in the Indian sugar industry at both aggregate and state levels.

Results

Conclusion