Trade Reforms and Total Factor Productivity Growth in India’s Aluminium Industry with Adjustment for Capacity Utilization

Abstract

This paper examines productivity performance of India’s aluminium industry in the pre and post-economic reforms and tries to relate economic capacity utilization with productivity growth. The results on partial productivity of factors show improvement in productivity of material and capital but not of labour. The total factor productivity growth in the post-reform period, however, declined. Total output growth in Indian aluminium industry is found to be mainly input-driven rather than productivity-driven. With adjustment for variations in capacity utilization, trend in total factor productivity growth remains declining. The paper also reconfirms the important links that exist between manufacturing productivity, trade orientation, industry specific characteristics and some macro economic variables. The liberalization process is found to have adverse impact on total factor productivity growth.