Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 24, No. 3, pp.357-387
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2011
Received 16 Apr 2010 Revised 10 Oct 2010 Accepted 26 Oct 2010

Growth and Productivity Performance in Indian Chemical Industry: An Empirical Investigation under New Trade Regime

Sarbapriya Ray
Assistant Professor, Department of Commerce, Shyampur Siddheswari Mahavidyalaya, Calcutta University, West Bengal, India, Tel: +91-943-318-0744 sarbapriyaray@yahoo.com

JEL Classification: L65

Abstract

This paper tries to assess productivity performance in terms of partial factor productivity and total factor productivity growth and tries to depict true snapshot of total factor productivity growth after adjusting economic capacity utilization for the entire period, 1980-81 to 2003-04. The results of partial factor productivity show improvement in productivity of material, but labour and capital productivity are gradually declining. Using translog index, the result on the overall productivity shows declining total factor productivity growth during post-reform period as compared to pre-reform period. Total output growth in Indian chemical industry is found to be mainly input-driven rather than productivity-driven. After adjusting capacity utilization, TFP growth does not affect its overall movement but remarkably mitigates its variation because variations between subperiods are smaller after adjusting capacity utilization as cyclical factors. The liberalization process is found to have its adverse impact on total factor productivity growth. Finally, analysis of the nature of competition shows that rigidity in the expansion of competition exists in the Indian chemical industry.

Keywords:

Chemical industry, Competition, Productivity, Liberalization, Capacity utilization

Acknowledgments

The author is thankful to two anonymous referees and editor of this journal for their constructive comments on an earlier draft of the paper. Responsibility for any error, however, lies fully with the author.

References

  • Ahluwalia, I. J. Productivity and Growth in Indian Manufacturing. Delhi: Oxford University Press, 1991.
  • Balakrishnan, P., and Pushpangadan, K. “Total Factor Productivity Growth in Manufacturing Industry: A Fresh Look.” Economic and Political Weekly 29 (No. 31 1994): 2028-35.
  • Balakrishnan, P., Pushpangadan, K., and Babu, M. Suresh. “Trade Liberalization and Productivity Growth in Manufacturing: Evidence from Firm Level Panel Data.” Economic and Political Weekly 35 (No. 41 2000): 3679-82.
  • Baldwin, R. John. The Dynamics of Industrial Competition, a North American Perspective. UK: Cambridge University Press, 1998.
  • Ball, L., and Moffitt, R. Productivity Growth and the Phillips Curve. NBER Working Paper No. 8421, 2001. [https://doi.org/10.3386/w8421]
  • Basu, S., and Kimball, M. Cyclical Productivity with Unobserved Input Variation. NBER Working Paper No. 5915, 1997. [https://doi.org/10.3386/w5915]
  • Brahmananda, P. R. Productivity in the Indian Economy: Rising Inputs for Falling Outputs. Delhi: Himalaya Publishing House, 1982.
  • Chand, S., and Sen, K. “Trade Liberalization and Productivity Growth: An Evidence from Indian Manufacturing.” The Review of Development Economics 6 (No. 1 2002): 120-32. [https://doi.org/10.1111/1467-9361.00145]
  • Das, Debkusum. Productivity Growth in Indian Manufacturing. An Application of Domer Aggregation Presented at the Workshop on Measurement of Productivity in India, New Delhi: Institute of Human Development, pp. 9-10, July, 1999.
  • Das, Debkusum. Quantifying Trade Barriers: Has Protection Declined Substantially in Indian Manufacturing? Working Paper 105, ICRIER, July, 2003.
  • Denison, E. F. Accounting for Slower Economic Growth: The United States in the 1970s. Washington, DC: The Brooking Institution, 1979.
  • Dholakia, R. H., and Kapur, D. “Economic Reforms and Trade Performance: Private Corporate Sector in India.” Economic and Political Weekly 36 (No. 49 2001): 4560-66.
  • Fare R., Grosskopf, S., Norriss, M., and Zhang, Z. “Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries.” The American Economic Review 84 (No. 1 1994): 66-83.
  • Fernandez, A. N. Trade Policy, Trade Volumes and Plant Level Productivity in Colombian Manufacturing Industries. Yale University Economic Growth Centre, Discussion Paper No. 847, 2003. [https://doi.org/10.1596/1813-9450-3064]
  • Goldar, B. N. Productivity Growth in Indian Industry. New Delhi: Allied Publishers, 1986.
  • Goldar, B. N., and Kumari, Anita. “Import Liberalization and Productivity Growth in Indian Manufacturing Industries in the 1990s.” The Developing Economies 41 (No. 4 2003): 436-59. [https://doi.org/10.1111/j.1746-1049.2003.tb01010.x]
  • Goldar, B. N., Renganathan, V. S., and Banga, Rashmi. “Ownership and Efficiency in Engineering Firms: 1990-91 to 1999-2000.” Economic and Political Weekly 39 (No. 5 2004): 441-7.
  • Harrison, A. E. “Productivity, Imperfect Competition and Trade Reform: Theory and Evidence.” Journal of International Economics 36 (Nos. 1-2 1994): 53-73. [https://doi.org/10.1016/0022-1996(94)90057-4]
  • Hyunbae, Chun, Hak K., Pyo, and Keun Hee, Rhee. “Multifactor Productivity in Korea and an International Comparison: Data and Productivity Estimates of the Korea Industrial Productivity Database.” Seoul Journal of Economics 21 (No. 4 2008): 551-78.
  • Ijiri, Y., and Simon, H. A. Skewed Distribution and the Size of Business. Amsterdam: North Holland, 1977.
  • Jorgenson, Dale W., and Griliches, Zvi. “The Explanation of Productivity Change.” Review of Economic Studies 34 (No. 3 1967): 249-82. [https://doi.org/10.2307/2296675]
  • Kathuria, V. K. “Liberalization, FDI and Productivity Spillover - An analysis of Indian Manufacturing firms.” Oxford Economic Papers 54 (No. 4 2002): 688-718. [https://doi.org/10.1093/oep/54.4.688]
  • Kato, Atsushi. Product Market Competition and Productivity in Indian Manufacturing Industry. Working Paper Series No. 1/263, Institute of Economic Growth, 2005.
  • Krishna, Pravin, and Mitra, D. “Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India.” Journal of Development Economics 56 (No. 2 1998): 447-62. [https://doi.org/10.1016/S0304-3878(98)00074-1]
  • Krugman, P. “The Myth of Asia’s Miracle.” Foreign Affairs 73 (No. 6 1994): 62-78. [https://doi.org/10.2307/20046929]
  • Kumari, A. Productivity Growth in Indian Engineering Industries during Pre-reform and Post-reform Period: An Analysis at Company Level. In Proceeding Examining Ten Years of Economic Reforms in India, ANU, Canberra, Australia, 2001.
  • Majumdar, Sumit K. “Fall and Rise of Productivity in Indian Industries: Has Economic Liberalization Had an Impact?” Economic and Political weekly 31 (No. 48 1996): M46-53.
  • Murty, M. N. “Interfuel Substitution and Derived Demands for Inputs in the Manufacturing Sector of India.” Journal of Quantitative Economics 2 (No. 1 1986): 119-135.
  • Norsworthy, John R., Harper, Michael J., and Kunze, Kent. The Slowdown in Productivity Growth: Analysis of Some Contributing Factors. Brooking Papers on Economic Activity, pp. 387-427, Fall 1979. [https://doi.org/10.2307/2534388]
  • Pradhan, G., and Barik, K. “Total Factor Productivity Growth in Developing Economies - A Study of Selected Industries in India.” Economic and Political Weekly 34 (No. 31 1999): M92-7.
  • Rajan, S. S, Reddy, K. L. N., and Pandit, V. “Total Factor Productivity in Selected Indian Manufacturing.” The ICFAI Journal of Industrial Economics 5 (No. 1 2008): 51-78.
  • Rao, M. “Manufacturing Productivity Growth: Method and Measurement.” Economic and Political Weekly 31 (No. 44 1996): 2927-36.
  • Rodrick D., and Subramanian, A. From Hindu Growth to Productivity Surge: The Mystery of the Indian Growth Transition. NBER Working Paper No. 10376, 2004. [https://doi.org/10.3386/w10376]
  • Siddharthan, N. S., and Pandit, B. L. “Liberalization and Investment: Behavior of MNEs and Large Corporate Firms in India.” International Business Review 7 (No. 5 1998): 535-48. [https://doi.org/10.1016/S0969-5931(98)00030-4]
  • Singh, S., Colli, T., and Fleming, E. The Effect of Private Sector Competition upon Productivity Growth in Indian Diary Processing Plants. Centre for Efficiency and Policy Analysis, Working Paper No. 1/2000, University of New England, 2000.
  • Srivastava, V. The Impact of India’s Economic Reforms on Industrial Productivity, Efficiency and Competitiveness: A Panel Study of Indian Companies. New Delhi: NCAER, 2001.
  • Tata Service Limited (TSL). Reforms and Productivity Trends in Indian Manufacturing Sectors. Department of Economics and Statistics, Tata Service Limited, Mumbai, 2003.
  • Topalova, Petia. Trade Liberalization and Firm Productivity: The Case of India. IMF Working Paper WP/04/28, Asia Pacific Department, February, 2004. [https://doi.org/10.5089/9781451844696.001]
  • Uchikawa, S. “Investment Boom and Underutilization of Capacity in the 1990s.” Economic and Political Weekly 36 (No. 34 2001): 3247-53.
  • Unel, B. Productivity Trends in Indian Manufacturing Sectors in the Last Two Decades. IMF Working Paper No. WP/03/22, 2003. [https://doi.org/10.5089/9781451843996.001]
  • World Trade Organization. Ministerial Conference, Fourth Session, Doha, 9-14 November, 2001.