Measurement of Productive Efficiency-A Stochastic Frontier Production Function Approach to Indian Industries

The efficiency term describes the maximum outputs attainable from utilizing the available inputs. A production is efficient if it cannot improve any of its inputs or outputs without worsening some of its other inputs or outputs. Efficiency can be increased by minimizing inputs while holding output constant or by maximizing output while holding inputs constant or a combination of both may increase efficiency ( Alias Radam et al,2010). Productive efficiency (also known as technical efficiency) is defined as a situation in which the most production is achieved from the resources available to the producer It occurs when the economy is utilizing all of its resources efficiently, producing most output from least input.