Productivity growth of Indian manufacturing sector: panel estimation of stochastic production frontier and technical inefficiency

S Madheswaran, Hailin Liao () and Badri Narayan RathAuthor-Email: Smadhes@yahoo.co.uk
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Badri Narayan RathAuthor-Email: Smadhes@yahoo.co.uk: Institute for Social and Economic Change, India
Authors registered in the RePEc Author Service: Badri Narayan Rath

Journal of Developing Areas, 2007, vol. 40, issue 2, 35-50

Abstract: Applying a Stochastic Production Frontier to sector-level data within manufacturing sector in India, this paper examines Total Factor Productivity (TFP) growth during 1979-80 to 1997-98. The analysis focuses on the trend of technical progress (TP) and Technical Efficiency Change (TEC). The empirical result suggests that the TFP growth in a large number of industries have improved during 1997-98 compared to 1980-81. TFP growth is mainly driven by TP not by TEC in case of Indian economy since the coefficient of TEC is negative. In the light of empirical results, the policy implication is that the priority to boost economic growth should be in the enhancement of productivity based catching-up capability. In this direction, an efficiency oriented action plan aimed to improve productivity efficiency of manufacturing sectors is required to be implemented for removing the fiscal and financial constraints faced by the enterprises which are located in industrially backward areas.

Keywords: Total Factor Productivity; Technical Efficiency change; Technological Progress; Stochastic Production Frontier; Indian Economy (search for similar items in EconPapers)
JEL-codes: D24 L60 O30 O47 O53 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Productivity Growth of Indian Manufacturing Sector: Panel Estimation of Stochastic Production Frontier and Technical Inefficiency (2004)
Working Paper: Productivity Growth of Indian Manufacturing Sector: Panel Estimation of Stochastic Production Frontier and Technical Inefficiency (2004)
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