What is pulling down productivity in Indian manufacturing? an evaluation for the textile industry

Abstract

In the age of global integration, it is imperative for organizations to be competitive and capture a larger share in the international market. Improvements in productivity, particularly in the manufacturing sector are of great significance for all developing economies. Productivity gains help improve competitiveness and aid organizations in achieving stability and success in the long run. This paper studies productivity performance of Indian textile manufacturing industry using data envelopment analysis. Firm-level panel data of 160 companies relevant to the period 2007–08 to 2012–13 is extracted from Ace Equity Plus, a financial database. The Malmquist productivity index has been computed with output orientation and the sources of productivity gain are identified. The pure efficiency component has emerged as the main factor pulling down productivity in Indian textile manufacturing. Pure efficiency is of concern for the industry as a whole. It is pulling down productivity at each scale of operation, from large scale to small scale. It is also deteriorating for both exporting and non-exporting companies. This reflects inefficient resource utilization and poor management. The organizations must look inward to improve efficiency and manufacturing productivity. The paper contributes by providing direction to organizations for improving manufacturing productivity by identifying the core target for managerial initiatives.