Economic Reforms, Capacity Utilization, and Productivity Growth in Indian Manufacturing

Arnab Deb
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Arnab Deb: International Management Institute

No 2013-05, Alumni working papers from University of Connecticut, Department of Economics

Abstract: In this study, we attempt to identify the channels through which economic reforms enhanced the productivity growth in total manufacturing sector in India. Because one possible channel is better utilization of plant capacity, we estimate capacity utilization rate in Indian manufacturing. Empirical estimates show that the annual average capacity utilization rate in Indian manufacturing was lower over the post-reform years. However, after the reforms capacity utilization rate grew faster at the all India level as well as for most of the major industrial states. Subsequent regression analysis confirms that there was evidence of a favorable impact of economic reforms on productivity growth in total manufacturing, beyond the positive impact of improved capacity utilization.

Keywords: Economic Reform; Total Factor Productivity; Data Envelopment Analysis; Malmquist Index; Gross Capacity Utilization; Net Capacity Utilization (search for similar items in EconPapers)
JEL-codes: C14 C61 D24 L60 O53 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013-06
New Economics Papers: this item is included in nep-eff
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