Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Productivity Growth in Organised Manufacturing Sector in India:Evidence from Technology Intensive Classification of Industries


Affiliations
1 Institute for Studies in Industrial Development, 4, Institutional Area, P.B. No 7513, Vasant Kunj, New Delhi 110070, India
     

   Subscribe/Renew Journal


This paper examines the trends in productivity, both labour productivity and Total Factor Productivity (TFP), of organised manufacturing in India. It uses the growth accounting technique based on value added and gross output production framework for assessing the productivity dynamics of 62 industries at the 4-digit level of disaggregation during the period of 1980 to 2007.The study finds a marked shift of industrial composition towards technology and skill intensive production activities. These segments have witnessed considerable growth in labour productivity and total factor productivity, the latter being more pronounced since 2000. Though TFP trend is highly cyclical, there is evidence of a revival in recent period. This suggests that Indian manufacturing has been experiencing sizeable technical change and dynamism of late. However, for a large number of industries, especially the traditional low-technology intensive sectors, the results are sensitive to the method of measuring TFP.


Keywords

Labour Productivity, Total Factor Productivity, Growth Accounting, India.
Subscription Login to verify subscription
User
Notifications
Font Size

  • Abramovitz, Moses (1956), Resources and Output Trends in the U.S. Since 1870, American Economic Review, 46(2): 5-23.

  • Ahluwalia, Isher Judge (1991), Productivity and Growth in Indian Manufacturing, Oxford University Press, Delhi.

  • Balakrishnan, Pulapre and K. Pushpangadan (1994), Total Factor Productivity Growth in Manufacturing Industry: A Fresh Look, Economic and Political Weekly, 29(31): 2028-2035.

  • ---------- (1998), What Do We Know about Productivity Growth in Indian Industry Economic Reform and Productivity Growth in Indian Manufacturing Industries: An Interaction of Technical Change and Scale Economies, Economic and Political Weekly, 33(33/34): 2241-2246.

  • Banga, Rashmi and Goldar, Bishwanath (2007), Contribution of Services to Output Growth and Productivity in Indian Manufacturing: Pre- and Post-Reforms, Economic and Political Weekly, 42(26): 2769-2777.

  • Barro, Robert J. (1999), Notes on growth accounting, Journal of Economic Growth, 4(2): 119–137.

  • Barro, Robert J. and Sala-I-MartinXavier (2005), Economic Growth, 2nd Edition, MIT Press, Cambridge.

  • Bollard, Albert, Peter J. Klenow and Gunjan Sharma (2013), 'India's Mysterious Manufacturing Miracle, Review of Economic Dynamics, 16(1): 59-85.

  • Bosworth, Barry, Susan M. Collins and Arvind Virmani (2007), Sources of Growth in the Indian Economy, NBER Working Paper No. W12901, National Bureau of Economic Research.

  • Christensen, Laurits R., Dale W. Jorgenson and Lawrence J. Lau (1973), Transcendental Logarithmic Production Frontiers, The Review of Economics and Statistics, 55(1): 28-45.

  • Comin, Diego (2008), Total Factor Productivity, The New Palgrave Dictionary of Economics, Second Edition (Eds.), Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan.

  • CSO (1987), Revised National Industrial Classification-1987, Central Statistical Organisation, Government of India, New Delhi.

  • ---------- (1998), National Industrial Classification-1998, Central Statistical Organisation, Government of India, New Delhi.

  • ---------- (2008), National Industrial Classification (All Economic Activities) 2008, Central Statistical Organisation, Government of India, New Delhi.

  • Das, Deb Kusum (2004), Manufacturing Productivity under Varying Trade Regimes, 1980-2000, Economic and Political Weekly, 39(5): 423-433.

  • Dholakia, Ravindra H. and Bakul H. Dholakia (1994), Total Factor Productivity Growth in Indian Manufacturing, Economic and Political Weekly, 30(28): 3342-3344.

  • Felipe, Jesus (1997), Total Factor Productivity Growth in East Asia: A Critical Survey, EDRC Report Series Number 65, Asian Development Bank, Economics and Development Resource Centre.

  • Gangopadhyay, Shubhashis and Wilma Wadhwa (1998), Economic Reforms and Labour, Economic and Political Weekly, 33(22): L40-L48.

  • Gatto, Massimo Del., Adriana Di Liberto, and Carmelo Petraglia (2011), Measuring Productivity, Journal of Economic Surveys, 25(5):952–1008.

  • Goldar, Bishwanath (1986), Productivity in Indian Industry, Allied Publishers Private Limited, New Delhi.

  • ---------- (2000), Productivity Growth in Indian Manufacturing in the 1980s and 1990s, paper presented at conference on Centre for Development Economics, Delhi School of Economics, Industrialisation in a Reforming Economy: A Quantitative Assessment, New Delhi, December 20-22.

  • ---------- (2014), Productivity in Indian Manufacturing in the Post-Reform Period: A Review of Studies, in Vinish Kathuria, S. N. Rajesh Raj and Kunal Sen (Eds.), Productivity in Indian Manufacturing: Measurement, Methods and Analysis, Routledge, New Delhi.

  • ---------- (2015), Productivity in Indian Manufacturing (1999–2011): Accounting for Imported Materials Input, Economic and Political Weekly, 50(35): 104-111.

  • Goldar, Bishwanath and Anita Kumari (2003), Import Liberalisation and Productivity Growth in Indian Manufacturing Industries in the 1990s, Developing Economies, 41(4): 436-60.

  • Grilliches, Zvi (1987), Productivity: Measurement Problems, in J. Eatwell, M. Milgate and P.Newman (Eds.), The New Palgrave Dictionary of Economics, Vol 3, New York, USA, Stockson Press.

  • Grilliches, Zvi and V. Ringsted (1971), Economies of Scale and Form of the Production Function, North-Holland Publishing Company, Amsterdam.

  • Hulten, Charles R. (2010), Growth accounting, in Bronwyn H. Hall and Nathan Rosenberg (eds.) Handbook of the Economics of Innovation, No 2: Chapter 23, 987-1031- Elsevier-North Holland.

  • Jorgenson, Dale W. (2009), The Economics of Productivity, The International Library of Critical Writings in Economics Northampton MA: Edward Elgar Publishing.

  • ---------- (1995), Productivity: Postwar U.S. Economic Growth, Volume 1 and 2, Cambridge, MA: MIT Press.

  • Jorgenson, Dale W. (2005), Accounting for Growth in the Information Age, in P. Aghion and S.Durlauf, (Eds.) Handbook of Economic Growth, Volume 1, chapter 10, Elsevier-North Holland.

  • Jorgenson, Dale W. and Zvi Griliches (1967), The Explanation of Productivity Change, Review of Economic Studies, 34(3): 249–283.

  • Kathuria V., S.N. Rajesh Raj and K. Sen (2014), Productivity in Indian Manufacturing: Measurement, Methods and Analysis, Delhi: Routledge India.

  • Kendrick, John W. (1961), Productivity Trends in the United States, Princeton University Press, Princeton.

  • Krugman, Paul (1994), The Age of Diminished Expectations, 4th Edition, MIT Press, Cambridge.

  • Law, M.T. (2000), Productivity and Economic Performance: An Overview of the Issues, Public Policy Sources, No. 37, The Fraser Institute, Vancouver BC.

  • Lipsey, R.G. and Carlaw, K. (2001), What does Total Factor Productivity measure?, Study Paper version 2, Simon Fraser University, Vancouver BC.

  • Mahadevan, Renuka (2003), To Measure or not to Measure Total Factor Productivity Growth?, Oxford Development Studies, 31(3): 365-378.

  • Metcalfe, Stan (1987), Technical Change, in J. Eatwell, M. Milgate and P. Newman (Eds.), The New Palgrave, a Dictionary of Economics, Macmillan, London.

  • Mitra, Arup (1999), Total Factor Productivity Growth and Technical Efficiency in Indian Industries, Economic and Political Weekly, 34(31): M98-M105.

  • Nataraj, Shanthi (2011), The Impact of Trade Liberalization on Productivity: Evidence from India's formal and Informal Manufacturing Sectors, Journal of International Economics, 85(2): 292-301.

  • OECD (2001), Measuring Productivity: Measurement of Aggregate and Industry-level Productivity Growth, OECD publication.

  • ---------- (2009), Measuring Capital, OECD Manual, second edition, OECD publication.

  • ---------- (2011), OECD Science, Technology and Industry Scoreboard, 2011: ISIC rev 3 Technology Intensity Definition, Economic Analysis and Statistics Division OECD, Paris.

  • Pattnayak, Sanja. S. and S.M. Thangavelu (2005), Economic Reform and Productivity Growth in Indian Manufacturing Industries: An Interaction of Technical Change and Scale Economies, Economic Modelling, 22(4): 601-615.

  • Pradhan, Gopinath and Kaustuva Barik (1998), Fluctuating total factor productivity in India: Evidence from selected polluting industries, Economic and Political Weekly, 33(9): M25– M30.

  • Rao, J. Mohan (1996), Manufacturing Productivity Growth: Method and Measurement, Economic and Political Weekly, 31(44): 2927-2936.

  • Severgnini, Herrn Battista (2010), Essays in Total Factor Productivity Measurement, Unpublished PhD thesis submitted to Berlin Doctoral Program in Economics and Management Science.

  • Solow, Robert M. (1957), Technical Change and the Aggregate Production Function, Review of Economics and Statistics,39(3): 212-320.

  • Syverson, Chad (2011), What Determines Productivity?, Journal of Economic Literature, 49(2): 326-365.

  • Tinbergen, J. (1942), Zur Theorie Der Langfristigen Wirtschaftsentwicklung, Weltwirtsschaftliches Archiv, 55, 511-549; translated as, "On The Theory of Trend Movements", In Klassen, L. H., Koych, L.M. and Witteveen, H. J. (Eds.), Jan Tinbergen Selected Papers, (Amsterdam: North Holland, 1959) pp. 182-221.

  • Trivedi, Pushpa, Anand Prakash, and David Sinate (2000),Productivity in Major Manufacturing Industries in India: 1973-74 to 1997-98, Development Research Group Study, No 20, Department of Economic Analysis and Policy, Reserve Bank of India, Mumbai.

  • Trivedi, Pushpa, L. Lakshmanan, Rajeev Jainand Yogesh Kumar Gupta (2011),Productivity, Efficiency and Competitiveness of the Indian Manufacturing Sector, Study No. 37, Development Research Group, Department of Economic and Policy Research, Reserve Bank of India.

  • Unel, Bulent (2003), Productivity Trends in India's Manufacturing Sectors in the last Two Decades, IMF Working Paper No. WP/03/22.

  • Virmani, Arvind and Danish A. Hashim (2011), J-Curve of Productivity and Growth: Indian Manufacturing Post-Liberalization, IMF Working Paper, WP/11/16.

  • Young, Alwyn (1992), A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore, NBER Macroeconomic Annual, MIT Press, Cambridge.


Abstract Views: 850

PDF Views: 3




  • Productivity Growth in Organised Manufacturing Sector in India:Evidence from Technology Intensive Classification of Industries

Abstract Views: 850  |  PDF Views: 3

Authors

R. Rijesh
Institute for Studies in Industrial Development, 4, Institutional Area, P.B. No 7513, Vasant Kunj, New Delhi 110070, India

Abstract


This paper examines the trends in productivity, both labour productivity and Total Factor Productivity (TFP), of organised manufacturing in India. It uses the growth accounting technique based on value added and gross output production framework for assessing the productivity dynamics of 62 industries at the 4-digit level of disaggregation during the period of 1980 to 2007.The study finds a marked shift of industrial composition towards technology and skill intensive production activities. These segments have witnessed considerable growth in labour productivity and total factor productivity, the latter being more pronounced since 2000. Though TFP trend is highly cyclical, there is evidence of a revival in recent period. This suggests that Indian manufacturing has been experiencing sizeable technical change and dynamism of late. However, for a large number of industries, especially the traditional low-technology intensive sectors, the results are sensitive to the method of measuring TFP.


Keywords


Labour Productivity, Total Factor Productivity, Growth Accounting, India.

References





DOI: https://doi.org/10.21648/arthavij%2F2016%2Fv58%2Fi2%2F141526