An Inter-state Analysis of Total Factor Productivity Growth in Selected Two-digit Manufacturing Industries in India

Abstract

This article makes an objective assessment of the impact of economic reforms of 1991 on productivity change in Indian manufacturing at a disaggregated level of industrial classification. Using the state-level input–output quantity data constructed from Annual Survey of Industries (ASI) measured rates of productivity change in selected two-digit manufacturing industries show that at the all-India level, only in cotton textile and chemical and chemical products industries productivity growth slowed down considerably after the reforms. While productivity in other industries improved after the reforms, there was evidence of inter-industry variation in productivity growth rates. State-level estimates show that not only in the leading but also in laggard industrial states the selected industries have experienced improvement in productivity after the reforms. For most of the industries the coefficient of variation in the rate of productivity changes across states diminished significantly after the reforms. But the reverse is true for cotton textiles and chemical and chemical products industries, suggesting that in these two industries the individual states failed to reap the benefit of reforms in a uniform manner. Also for all industries except textile products, technological progress was the prime driving force behind the productivity growth over the post-reform years.