A Cost Function Approach to the Estimation of Total Factor Productivity Growth in India’s Rubber and Plastic Products Industry with Adjustment for Capacity Utilisation: 1981-82 to 2016-17

Abstract

This study attempts to measure Total Factor Productivity Growth (TFPG) of Indian Rubber and Plastic Products Industry during the period 1981-82 to 2016-17. As, we have taken a long-study period, therefore, a decadal analysis of TFPG is also made in our study. We have chosen this industry on the basis of its higher share in the Gross Manufacturing Value Added. We have tried to make a comparison between the estimates of TFPG in the pre (1981-82 to 1990-1991) & post liberalisation (1991-92 to 2016-17) era. This has been done to examine the impact of liberalization on the TFPG of the selected Indian Manufacturing Industry. Most of the earlier studies show negative or very low TFP growth, though there is an increase in the rate of decline of TFPG in post-liberalisation period. In a sense, the liberalization process is found to have its adverse impact on total factor productivity growth. We may opine that if TFPG is adjusted with Capacity Utilization, it may lead to a refined measure of TFPG. Our result shows a positive and decreasing trend in TFPG (adjustment with Capacity Utilisation) in the post-reform period.