Rate of Profit in Consumer Goods Sector in India: An Analysis in Marxian Framework

Abstract

This paper wants to examine the empirical validity of the Marxian law of falling tendency of the rate of profit in the consumer goods sector in India at both aggregated and disaggregated levels during the period, 1967–2010. In this context, it attempts to find out whether there are any significant changes in the rate of profit variable in Indian consumer goods sector at both aggregated and disaggregated. The comparison between pre and post reform movements of the Marxian variables presents some interesting facts. During the pre reform years the rate of profit shows upward trend in almost all the consumer goods sectors and the consumer goods industry as a whole. But the same is not true during the post reform period. The study observes that in majority of the consumer goods industries rate of profit exhibits declining movement during the liberalization period. The other two Marxian variables like the rate of surplus value and organic composition of capital show significant rising trend during the same period. In fact, the relative strength of increasing organic composition outweighs the effect of rate of surplus value in these sectors. This illustrates the significance of Marxian law of falling tendency of the rate of profit in some of the prominent consumer goods sectors in India during the post reform years. In the sectors like food product the growth of technical composition over labour productivity and falling wage share signify the declining bargaining power of the Indian workers in the post reform years.