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Citation Information

Type Working Paper
Title Profitability in India’s Organized Manufacturing Sector: The Role of Technology, Distribution, and Demand
Author(s)
Publication (Day/Month/Year) 2015
URL http://www.umass.edu/economics/publications/2015-04.pdf
Abstract
Using aggregate data from the Annual Survey of Industries, we analyze profitability in India’s
organized manufacturing sector from 1982-83 to 2012-13. Over the whole period of analysis,
the rate of profit grew at about 1 percent per annum, primarily driven by a rising share of
profits. We use structural break tests to identify medium and short run regimes. We find two
medium run regimes, one of declining profitability (1982-83 to 2001-02), and another of
growing profitability (2001-02 to 2012-13). We find six short run regimes, of which only two are
periods of rising profitability, 1987-88 to 1996-97, and 2001-02 to 2007-08. All other short run
periods have witnessed declining profitability. Profit rate decomposition analysis shows that
both in the medium and short run, technological factors have been the most important
determinants of changes in profitability.

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