Manufacturing agglomeration and export dynamics across Indian states

Abstract

We track the impact of industrial agglomeration on the export behaviour of manufacturing plants in the organized sector across the Indian states during 2008–2009 through 2013–2014, at disaggregated 4-digit industry level. In our dynamic probit analysis, we find that manufacturing plants in industries with increasing agglomeration are more likely to export, and there is strong evidence of positive spillover effect of local exporting plants. Moreover, prior export experience of a plant, growth in its factor productivity, and greater use of imported-inputs in production significantly enhanced its export propensity. Among the infrastructure facilities, road density is confirmed to be a key factor in enhancing export behaviour. However, power availability appears to be a non-critical factor, suggesting that exporting plants in India rely on captive power generation in the face of electricity shortages.