Economic Reform and Productivity growth in Indian Manufacturing Industries: An interaction of technical change and scale economies

Sanja S. Pattnayak () and S. M. Thangavelu ()
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Sanja S. Pattnayak: National University of Singapore
S. M. Thangavelu: National University of Singapore

Departmental Working Papers from National University of Singapore, Department of Economics

Abstract: This paper studies the effects of the key economic reforms of 1991 on the Indian manufacturing industries using a panel of manufacturing industries. A Translog cost function is used to analyze the production structure in terms of biased technical change and economies of scale. A panel consisting of 121 Indian manufacturing industries from 1982 to 1998 was used in our estimation. The results of our paper support the evidence that there are economies of scale (only moderate) in the Indian manufacturing industries and it has been exploited after the key economic reforms in 1991. Most of the industries in our study revealed bias technology change and majority of the industries have experienced capital-using technical change. This suggests that the key economic reforms of liberalizing the capacity licensing regime that allows greater investment in capital goods will have a positive impact on productive performance of the industries if the price of capital does not substantially increase after the economic reforms. We observe TFP improvements for most of the industries after the 1991 reform initiatives, which support the evidence of improvements in economic efficiency after the key reform initiatives of the 1991.

Keywords: Total Factor Productivity; Bias Technical Change; Economies of Scale; Economic Reforms (search for similar items in EconPapers)
JEL-codes: O3 O4 C23 (search for similar items in EconPapers)
Date: 2003
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