Competition and Profitability in Indian Manufacturing Industries

K. Pushpangadan and N. Shanta
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K. Pushpangadan: Centre for Development Studies, Trivandrum 695011, India
N. Shanta: Centre for Development Studies, Trivandrum 695011, India

Indian Economic Review, 2008, vol. 43, issue 1, pages 103-123

Abstract: The paper examines empirical evidence on the dynamic view of competition in Indian manufacturing industries using Mueller’s auto-profit equations. The competitive profit rate for all industries is estimated to be 5 % and the average firm-specific rent 4.2 %. The observed average profit rate, 7.5 %, is thus 50% higher than the competitive rate. The estimate of the average strength of competition in the manufacturing sector shows that it takes 0.9 years for the deviation of profit rates from the norm to reduce to its half level. When compared with the findings of the studies for the pre-liberalisation period, the competitive environment in the Indian manufacturing sector is found to have deteriorated in the post - liberalisation period.

Keywords: Competition; Persistence of Profit Rates; Static and Dynamic (search for similar items in EconPapers)
JEL-codes: C22 D21 D41 L6 (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:dse:indecr:v:43:y:2008:i:1:p:103-123

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