Productivity in Indian manufacturing: evidence from the textile industry

Abstract

Purpose – Productivity gain in the manufacturing sector draws immense significance for all developing countries, particularly due to its contribution in enhancing competitiveness and promoting economic growth in the long run. The purpose of this paper is to study the sources of productivity gain for large and small-scale manufacturing firms. Design/methodology/approach – This paper studies productivity performance of Indian textile manufacturing industry using firm-level panel data of 160 companies for the period 2007-2008 to 2012-2013. The output-oriented Malmquist productivity index has been computed through data envelopment analysis. Further, the sources of productivity gain are identified for the entire textile industry as well as for the small and large-scale sector companies separately. Findings – Regarding the sources of productivity gain, technology change and scale efficiency seem to be the major drivers. Pure efficiency change is a concern for all firms irrespective of scale. The results suggest that moderately large companies are exhibiting better productivity performance during the study period. Research limitations/implications – The research is limited to a single industry, reference database and methodology. There is scope for further research at the micro-level to analyse the drivers of productivity for enterprises operating at different scales. Originality/value – The paper contributes to existing literature by identifying the core action area for improving productivity performance in Indian textile manufacturing as the pure efficiency component. It also adds to research on the most productive scale of operation in manufacturing.