This study analyses the productive efficiency of rural, urban and aggregate industries of
India from1998-99 to 2010-11. A stochastic frontier production function as proposed by
Battese and coelli (1992) was applied to analyse the data based on the objectives. It was
found that both urban and rural Industries were enjoying increasing returns to scale. This had
no doubt made the aggregate industries also work under increasing returns to scale. The
technical efficiency of rural industries have not shown any decline but showed mixed trend.
The inefficiency present in aggregate industries was negligible. But as indicated earlier about
their inefficiency in future, these industries can become more efficient by increasing output,
using the existing resources or by reducing costs given the current level of production.
Labour was the main factor without much variation in its contribution to the growth of net
value added in urban industries. Whereas capital was the main input factor for aggregate
industries. The main factors of production were both capital and labour in rural industries.