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Citation Information

Type Report
Title Regional Variation of the Productivity Performance in Indian Manufacturing Industries
Author(s)
Publication (Day/Month/Year) 2008
URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1263848
Abstract
Although, there are many studies undertaken to examine the productivity in Indian industry in the post reform period, there is limited literature on variation in productivity at different regions/states of India. In this paper, productivity of 15 major states of India is compared based on Annual Survey of Industries data from 1979-80 to 2003-04. Since the impact of reform is not same for different types of industries; industries have been categorized into three categories - Traditional, Basic and High-Tech industries and production frontier has been estimated and productivity have been computed for the three categories separately. I have constructed Malmquist Productivity Index (MPI) along with its decomposition - OTEC (Overall Technical Efficiency Change Index), PEC (Pure Efficiency Change Index), SEC (Scale Efficiency Index) and TECH (Technical Change Index) for 25 years and for 15 major states of India for each category of industries - Traditional, Basic and High-tech.

From efficiency results, it can be observed that, basic industry is the most inefficient industry in terms of overall technical efficiency. However, in terms of scale efficiency, basic industry is the most efficient industry and traditional industry is the most inefficient industry. But, the scale efficiency of traditional industry has improved after reform.

From MPI results, it is observed that regional differences in TFP growth persist and the variation has increased in the post-reform period. However, variation in TFP growth is due to increased variability in the rate of technical progress across states in the post-reform period and not due to variation in technical efficiency. Technical efficiency has, in fact, decreased after reform for all the three industries indicating tendency of convergence of overall technical efficiency of the states' manufacturing.

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