An Empirical Exploration of the Performance of Fertilizers Industry in India: An Econometric Analysis

The controversy relating to the provision of fertilizers subsidy and the recent debate over its withdrawal has necessitated the present study to examine the performance of the fertilizers industry (Inorganic Industry) in India. Analysis of Cost Functions and Cobb-Douglas Production Function have been made to study the performance of the industry, the results of which reveal that the industry is subject to the law of increasing costs. The findings get further support from the examination of the production function, which reveals that the average productivity of labour exceeds its marginal productivity. Analysis of shifting cost functions further highlight that the firms belonging to this industry expand capacities. Even before fully exploiting the existing capacity conforming to the oligopolistic behavioral tendency of the firms belonging to the fertilizers industry.