The measurement of efficiency of an industry is important both for the economic
theorist and economic policy maker. If economic planning is to concern itself with particular
industries, it is important to know how far a given industry can be expected to increase its
output by simply increasing its efficiency, without absorbing further resources. Past studies
have shown that productivity can be raised by improving efficiency, which usually is a
neglected source of productivity, without increasing the resource base or without
developing new technologies.
The major objective of this study was to analyse technical, scale, cost and allocative
efficiencies of Khadi and Village industries in India between 2000-01and 2010-11. The
efficiency scores were obtained by applying Data Envelopment Approach (DEA). It could
be found that for the entire period, technical, scale, cost and allocative efficient DMUs
(Decision Making Units) were more under variable return to scale (VRS) than under constant
returns to scale (CRS) production technology. Also it is very clear that inefficiency could be
due to the existence of either increasing or decreasing returns to scale.