Reduction of Excess Capacity with Response of Capital Intensity

Abstract

Abstract This study aimed to demonstrate the profound impact of reducing excess capacity in terms of capital intensity on the growth rate of labor productivity in the manufacturing industry sector. The research was conducted for PhD study in 2019 across 55 groups of Indian manufacturing industries in six major Indian industrial states, utilizing the modified VES estimation model for data analysis. The results revealed that higher productivity per worker can be achieved by increasing capital per worker, indicating the crucial role of capital intensity in the reduction of excess capacity and productivity growth. The practical implications of this research suggest that investors should consider the importance of capital investment in improving labor productivity in the manufacturing industry sector. The findings have significant implications for investors, policymakers, and industry stakeholders, highlighting the importance of capital investment in improving labor productivity. Overall, this study provides valuable insights into the relationship between excess capacity, capital intensity, and labor productivity in the manufacturing industry sector, contributing to the existing literature on the subject and providing a basis for further research in this area. JEL Code: L6, L5.