External shocks and dynamics of resource use patterns: empirical evidence from the Indian manufacturing sector

Abstract

AbstractWhile promoting manufacturing growth is imperative to boost economic growth, potential adverse consequences on natural resources and ecology have created sustainability-related concerns and challenges. In India, with the reform processes deepening further and the business environment becoming more market-oriented over the years, the adoption of appropriate measures for sustainable manufacturing growth under such conditions would require a deeper investigation of the underlying dynamics, particularly to address the impacts of external shocks. This is especially true when external shocks alter market dynamics and, hence, input is used significantly in the manufacturing sector. Given this backdrop, the present paper examines how the major external shocks to the Indian economy during in the post-reform era have altered the resource use patterns in selected manufacturing industries. The paper uses secondary data collected from the KLEMS database of the Reserve Bank of India for the period from 1980–81 to 2019–20 and applies descriptive statistics and econometric techniques to address the research objective. It is found that energy intensity, vertical integration, capital intensity, and rate of growth of total factor productivity decreased over the decades, whereas labour productivity experienced an increasing trend in most industries. However, the trends are mixed in the case of material intensity. Further, the regression results indicate significant effects of external shocks on resource use, factor productivity, and structural changes. There are also industry-specific differences in the nature and extent of such changes. Hence, a deeper investigation of the underlying factors and impacts at a disaggregate industry level is necessary to draw more robust insights.