Productivity Growth and Efficiency Differences in Indian Manufacturing Sector: An Inter-State Analysis

Abstract

ABSTRACT The present study endeavours to analyze the productivity growth and technical efficiency of Indian manufacturing sector both at aggregate and disaggregate inter-state level by taking into account the entire study period of 35 years from 1980-81 to 2014-15 and three distinct sub-periods viz., (i) Pre-reforms period (1980-81 to 1990-91: Period-I) ii) Post-reforms period Phase-I (1991-92 to 2000- 2001: Period-II) and iii) Post- reforms period Phase-II (2001-02 to 2014-15: Period-III).The study utilizes the single output (gross value added) and two inputs (gross fixed capital stock and total employees) framework and employed Data Envelopment Analysis (DEA) approach to compute the total factor productivity growth and technical efficiency scores of sixteen major Indian states. The comparative analysis of pre-reforms and post-reforms period depicted a slower TFP growth in the post-reforms era as compared to the pre-reforms period. Further, a non-parametric decomposition of the Malmquist Productivity Index (MPI) into its two components revealed that both before and after reforms, technological progress rather than technical efficiency change contributed more towards the productivity growth of manufacturing sector of these Indian states.