Total Factor Productivity of Manufacturing Sector in India: A Regional Analysis for the State of Haryana

Transcription

1 Int. J. Manag. Bus. Res., 1 (4), , Autumn 2011 Sh. Sehgal; S. K. Sharma IAU Ttal Factr Prductivity f Manufacturing Sectr in India: A Reginal Analysis fr the State f Haryana 1 Sh. Sehgal, 2* S. K. Sharma 1 Department f Ecnmics, Jammu University, Jammu, India 2* Schl f Business Ecnmics, Cllage f Management, Shri Mata Vaishn Devi University, Katra, India ABSTRACT: The present study used different categries f rganized sectr manufacturing industries pled data fr the perids f and in Haryana state (India). The present undertaking seeks t analyze the inter-tempral and inter-industry cmparisn f ttal factr prductivity (TFP) measured by Malmquist prductivity index - an applicatin f DEA which calculates the indices f TFP and its cmpnents including technlgy and efficiency changes. The general develpment pattern bserved by the Haryana is definitely nt a healthy sign f structural change in the ecnmy. The analysis f the discussin reflects that while the tertiary sectrs have maintained its lin s share in GDP f India and Haryana as well, the declining trend in the share f primary sectr and mre r less stable cntributin f the secndary sectr is nticeable. The study reveals that technical efficiency change is the key driver f TFPG in the manufacturing sectr f Haryana during pre refrms perid, hwever, the picture has turned arund during the pst refrms perid. A psitive impact f liberalizatin plicy n technlgical advancement f the manufacturing sectr f the state has been experienced. The pst refrms perid the state has shwn the inefficiency in the utilizatin f resurces in hand as an alarming sign indicating the incapability f manufacturing sectr f the state in questin in dealing with the level f technlgical advancements. Keywrds: Technlgical change, Ttal factr prductivity, Grss dmestic prductin, Efficiency change, Malmquist prductivity index, Innvatins INTRODUCTION Prductivity grwth is essential nt nly t increase utput, but als t imprve the cmpetitiveness f an industry bth in the dmestic and internatinal markets. The grwth f an ecnmy is gverned by tw distinct surces f grwth that is, input driven and prductivity driven. The input driven grwth is achieved thrugh the increase in factrs f prductin which is certainly subjected t diminishing returns and is nt sustainable in the lng run as suggested by Yung (1992); Krugman (1994). The prductivity-driven grwth is the grwth in utput that cannt be explained by the grwth in ttal inputs. It is nrmally credited t the imprvement in knwledge, rganizatinal structure, human resurces management, skills attainment, infrmatin technlgy and efficient use f factrs f prductin. In the recent years equal weight has been given t prductivity *Crrespnding Authr, suparn329@yah.c.in Full Name: Suparn Kumar Sharma grwth alng with capital accumulatin. Whether ne tk the structural utlk f the develpment, r the classical ne, in bth the cases, prductivity is critical t the utcme (Arra and Singh, 2008). The grwth in prductivity, which is als knwn as ttal factr prductivity grwth (TFPG), is the difference between the actual grwth f utput and the grwth due t a cmpsite f all factr inputs. Prductivity is nt everything, but in the lng run it is almst everything (Krugman, 1990). Thus, in the curse f time the nly sustained manner t increase per capita grss dmestic prductin (GDP) is pssible thrugh increasing the amunt f utput prduced by a given quantity f inputs that is raising ttal factr prductivity (TFP). Prductivity grwth is accepted as a key characteristic f ecnmic dynamism.

2 Sh. Sehgal; S. K. Sharma It becmes pertinent t analyze the prductivity perfrmance f the industrial sectr which has already faced the utside wrld stiff cmpetitin in the era f glbalizatin and liberalizatin and where the rle f gvernment is restricted. The sectin Lliterature Review related with the present study; while the sectin Research Methd used fr the purpse f the study and this sectin als cntain infrmatin regarding database and variables used. Evaluatin f the results is summarized and discussed in sectin Results and Discussin and t end with, the sectin Cnclusin cmprises f cnclusin and suggestins. Literature Review The prductivity grwth in the Indian manufacturing sectr have been subject f a number f studies that vary widely depending upn the methdlgy used and the perid cvered. One f the pineer studies in the field f prductivity, Fare et al. (1994) analyzed the prductivity grwth f 17 OECD cuntries ver the perid f 1979 t 1988 using nn parametric prgramming methd and cncluded that prductivity grwth f United States is slightly higher than average grwth and this is due t technlgical prgress. They als cncluded that Japan s prductivity grwth is the highest in the sample with almst half due t efficiency change. Amng the pst 1980 studies, the study f Ahluwalia (1991) is f certain significance. The main bjective f the study was t calculate the grwth rate f TFP in Indian manufacturing industries cvering a perid frm t The study based n the Annual Survey f Industry (ASI) data, fund a marked increase in the grwth rate f TFP at 3.4 per cent per annum in Indian manufacturing. The estimates f translg prductin functin using pled crsssectin and time series data als shwed a marked imprvement in the rate f TFP grwth. She attributed this bserved turnarund in prductivity grwth in Indian manufacturing in the 1980s t ecnmic plicies f liberalizatin. Misra (2006) fcused n the impact f India s ecnmic refrms n industrial structure and prductivity. The discussin used the ASI data and cvered bth the tw-digit and three-digit level f industries. The study has shwn very lw perfrmance f Indian manufacturing sectr and the reasn fr such a bad perfrmance was the cnsequences f the type f plicies being fllwed during refrms. Leachman et al. (2005), used data frm eight majr autmbile manufacturers and adpted a tw stage mdel t study the perfrmance f manufacturing units. They cnsidered R&D intensity (rati f expenditure n R&D and sales) as ne f the explanatry variables, while determining the level f efficiency f manufactures and thus demnstrated that a strng R&D cmmitment and capability t reduce prductin time. Jajri et al. (2006) in their attempt analysed trend f efficiency imprvement, technlgical change and TFPG in the Malaysian manufacturing sectr and cncluded that during the perid under study, TFPG has increased and the majr cntributin fr the grwth is f technical efficiency. The study by Manjappa and Majesha (2008) examined the TFPG and its cmpnents in ten manufacturing industries. He classified them int capital-intensive and labur-intensive industries (five in each segment) using annual time series data fr the perid f 1994 t The study applied MPI n panel data and cncluded that the average TFPG in the capital-intensive industry segment grew mderately at 1.7 per cent per annum, whereas, in its cunterpart, selected labur-intensive industries have shwed a prductivity regress ver the perid f study. Heshmati and Kumbhakar (2010) in their study, using panel data n Chinese prvinces, identified a number f key technlgy shifters and their effect n technical change and TFPG. Mahadevan (2001 and 2002) used bth stchastic frntier apprach and DEA separately t calculate the TFPG f Malaysian manufacturing industries during He used the same data set t make cmparisn between the tw appraches and cncluded that bth methds demnstrated a decline f TFPG after 1990, with increasing cntributin f technlgy prgress and declining cntributin f technical efficiency change. Jshi and Singh (2010) measured the TFP and identifies its surces thrugh applying a nn-parametric DEA-based MPI apprach. Thrugh this apprach, the prductivity grwth was decmpsed int technical efficiency change and technlgical change. Further, an attempt had als been made t study the variatin in the prductivity grwth rates acrss lcatin, scalesize and type f garments. A few studies which have estimated the prductivity at reginal level including Seth and Gldar (1989) wh have studied trends in industrial utput in 12 states f India during the perid t The study has been cnfined t rganized manufacturing 242

3 Int. J. Manag. Sh. Sehgal; Bus. Res., S. K. 1 (4), Sharma , Autumn 2011 sectr and the grwth rates in industrial utput have been estimated fr 3 sub perids using kinked expnential mdel. Accrding t the study, after 1960s, all states experienced a decline in the rates f industrial grwth. Further, Gldar and Veeramani (2005) studied the relatinship f investment climate with the level f TFP fr selected states f the cuntry. Anther attempt was made by Trivedi (2004) t interpret interstate differences in prductivity mvements in rganized manufacturing sectr, in a larger perspective f emplyment and utput trends. With the time span f t in case f 10 majr states f India, the study empirically cnfirmed the existence f inter-state differences in prductivity levels and grwth rates. It pints ut that states, such as, Bihar and West Bengal are diverging away rather than cnverging t the grwth rates f utput f rganized manufacturing sectr at natinal level. Kumar (2004) measured ttal factr prductivity grwth fr industrial manufacturing sectr f 15 majr states f India fr the perid t using nn-parametric linear prgramming apprach. The analysis has als been made t measure the surces f TFPG and level f biasness in technical change. Findings f the study signified imprvement in TFP. The study pinted ut that reginal differences in TFP persist in India, althugh the magnitude f variatin has declined in the pst refrms perid. Mrever, it is als fund that there is a tendency f cnvergence in terms f TFP grwth rate amng Indian states during the pst refrms perid and nly the states that were technically efficient at the beginning f the refrms remain innvative. Nrswrthy and Jang (1992) fund mixed results fr Indian manufacturing industries acrss the states. They fund that Indian heavy industry exhibited a higher grwth ptential in terms f TFP. Ray (1997) used a nn parametric methd f DEA t measure Malmquist prductivity index fr manufacturing sectr in the different states in India fr the perid The measured Malmquist prductivity index is decmpsed t separate the cntributin f technical change, change in technical efficiency and change in scale efficiency. The analysis depicted that in mst f the states prductivity decline is due t technical regress. The regressin results further suggest that it is the greater urbanizatin and higher capital-labur rati that can prmte prductivity in India. As against this higher incidence f industrial disputes and prepnderance f nn prductin wrkers can hinder the prductivity grwth. Anther study by Ray (2003) measured technical efficiency by using DEA apprach and prductivity by using Trnquist and Malmquist index fr sme f the Indian states. The estimated results shwed that annual rate f prductivity grwth by bth the methds has been higher in the pst refrms perid than in the pre refrms perid. Hwever, sme states like Assam, Himachal Pradesh and Orissa has witnessed prductivity regress during pst refrms perid. Decmpsitin f Malmquist prductivity index illustrated that imprvement in technical efficiency as well as faster rates f technical prgress was cntributed t the bserved acceleratin in the grwth rate. A subsequent regressin results cnfirmed that there is a tendency twards cnvergence in prductivity grwth rates acrss states. There are many studies n prductivity grwth in Indian manufacturing sectr but ne culd find that these estimates vary widely depending upn the methdlgy used and the perid cvered. As discussed in the abve paragraphs, there are buntiful studies cnducted s far t measure the prductivity perfrmance f Indian industry bth at aggregate and disaggregate level (Gldar, 1986; Ahulwalia, 1991; Unel, 2003; Gldar, 2004; Misra, 2006; Manjappa and Majesha, 2008). On the ther hand there are few studies that tried t analysis the inter-state variatins with respect t prductivity perfrmance (Ray, 1997; Ray, 2002; Trivedi, 2004; Kumar, 2004; Gldar and Veeramani, 2005). But the review f literature als wrap up that, there is serius dearth f studies where effrts have been made t study different dimensins f ttal factr prductivity and its cmpnents grwth and related issues at the reginal and disaggregate level. It becmes crucial t study the pattern and level f grwth f prductivity and efficiency f the manufacturing sectr at the reginal level fr different states f the Indian unin in particular. The Indian ecnmy is abut t cmplete tw decades f ecnmic refrms and these types f micr level study wuld prepare an empirical and true picture f the perfrmance f the manufacturing sectr at the reginal level. On the similar lines, the present attempt seeks t analyze the inter-tempral and inter-industry cmparisn f TFP f the rganised manufacturing sectr f Haryana by Malmquist prductivity index (MPI) using nnparametric Data Envelpment Analysis. The grwth f 243

4 Ttal Factr Prductivity Sh. Sehgal; f S. Manufacturing K. Sharma Sectr in India manufacturing sectr in Haryana state is the need f the hur, as the agriculture grwth appears t have already reached t state f plateau after enjying a perid f high grwth in the wake f Green Revlutin (Sharma, 2011). With the same cmmitment and passin an attempt has been made in the present paper t prepare an in-depth analysis f manufacturing sectr f the state f Haryana, which is ne f the emerging and imprtant ecnmies f the cuntry. RESEARCH METHOD Data Depictin and Dimensins f Variables The data n GDP and its cmpnents are extracted frm Central Statistical Organisatin (CSO). CSO cntributes by cmpiling the statistics fr GDP fr all the states and Unin territries in India. The study used the series n GDP cmprising fr perid frm t As the data is available with different base series, fr the purpse f the study the data fr India and Haryana is cnverted int base by using splicing methdlgy, in rder t get the time series data with a single base. Fr cmputing the MPI, the required tw digit level data f manufacturing sectr f Haryana in a balanced panel data frmat have been culled ut frm the varius issues f Summary Results f Annual Survey f Industries. The primary and very crucial stride in carrying ut an empirical, specified and crrect estimatin mdeling is the determinatin f inputs and utputs. The vital pint in this prcedure is that the input-utput variables must be selected in accrdance with the type and methd f prductivity measurement being assessed (Mstafa, 2010). It is pertinent t mentin here that since the present analysis f manufacturing sectr f sample states f Haryana, is cnfined t the perid frm t (i.e. Perid-I) and fr the purpse f mre indepth analysis the pled data has als been studied fr tw sub perids i.e. pre refrms ( t , i.e. Perid-II) and pst refrms perid ( t i.e. Perid-III). As such since the required data is available with different Natinal Industrial Classificatins (NIC). The NIC-1970 was fllwed t classify ecnmic activities f the factries frm ASI during t The NIC had then been intrduced and pursued until The NIC-1998 was then fllwed frm ASI t ASI Frm , the new series f classificatin, i.e., NIC-2004 has been intrduced and the same has been used till Fr the present study, all the required time-series data is prepared based n NIC-87 by using the available tw-digit cncrdance tables. In the present study, fr the sake f simplicity and straight-frward analysis a few f the industrial grups f manufacturing sectr have been clubbed tgether fr the tw-digit level Natinal Industrial Classificatins. Different industrial grups categrized in the study includes Manufacture f Fd and Beverages cmprises NIC 20-21, 22 ; Manufacture f Cttn & Textile includes NIC 23, 24, 25,26; Manufacture f Wd includes NIC 27; Manufacture f Paper includes NIC 28; Manufacture f Leather cmprises NIC 29; Manufacture f Basic Chemicals encmpasses NIC 30; Manufacture f Rubber includes NIC 31; Manufacture f Nn Metallic and Basic Ally includes NIC 32-33; Manufacture f Machinery and Machine Tls includes NIC 34, 35-36; Manufacture f Transprt embraces NIC 37 and Manufacture f ther Manufacturing Industries encmpasses NIC 38. In the present study, ne utput (grss value added at cnstant prices) and tw inputs (grss fixed capital at cnstant prices and number f emplyees) in the mdel is cnsidered. Fllwing, Jayadevan (1995) and Gldar (1986), the study preferred the use f grss value added as an index f utput instead f net value added as the depreciatin charges in Indian industries are knwn t be highly arbitrary fixed by the incme tax authrities and seldm represents true/actual capital cnsumptin. Using apprpriate whlesale price indices at prices, all the nminal values have been deflated and the grss value added figures at cnstant prices ( ) have been utilized as an index f utput. The study used the grss fixed capital stck as a measure f capital input. The standard practice f perpetual inventry methd has been fllwed here t generate the series f grss fixed capital (GFC) stck at cnstant prices. This requires a grss investment series, an asset price deflatr, a depreciatin rate and a benchmark capital stck. T btain a series f grss fixed capital stck at cnstant prices, the fllwing steps are fllwed: Step I: Fllwing Gldar (1986), Balkrishnan and Pushapgandan (1994) and Trivedi et al. (2011) duble the bk value f fixed capital is taken as a measure f capital stck fr the base year It is btained as: K 0 = 2 (B ) (i) 244

5 Int. J. Manag. Sh. Sehgal; Bus. Res., S. 1 K. (4), Sharma , Autumn 2011 Step II: The grss real investment (I t ) has been btained by using fllwing relatinship: Bt Bt 1+ Dt It = P t (ii) where, B t =Bk value f fixed capital in the year t; D t =Value f depreciatin f fixed assets in year t; and P t =Price Index fr machinery and machine tls fr year t. Step III: After btaining the estimates f fixed capital fr benchmark year and grss real investment, the fllwing equatin has been used fr the measurement f grss fixed capital series: K t = K t-1 + I t δ.k t-1 (iii) Where, K t =Grss fixed capital by the end f year t; I t =Grss real investment in fixed capital during the year t; and δ=annual rate f discard f capital. Fllwing Unel (2003), the present study has taken annual rate f discarding f capital equals t 5 per cent. The infrmatin f ttal persns engaged prvided by Annual Survey f Industries cnsisting f bth nnprductin and prductin wrkers, has been taken as a measure f labur input. Malmquist Prductivity Index The traditinal apprach t prductivity measurement is partial factr prductivity, which is an indicatr f the rati f ttal utput t a single input such as capital input but it ignres the cntributin f ther inputs. Thus, the cncept f TFP is mre apprpriate in cntext f resurce use prductivity. The TFP is an index f utput divided by an index f input bundle, and refers t the change in the prductivity ver time. The different appraches f TFP measurement are grwth accunting apprach, stchastic frntier analysis (SFA) and DEA based Malmquist prductivity index (Jshi and Singh, 2010). The grwth accunting apprach requires the specificatin f a prductin functin and makes unrealistic assumptins like cnstant returns t scale and perfect cmpetitin. It assumes that a firm perates n its prductin frntier, implying that it has n technical inefficiency. Thus, TFPG measured thrugh this apprach is due t technical change, nt due t technical efficiency change (Mawsn et al., 2003). In mdern wrld, SFA and DEA based MPI have becme ppular appraches fr estimatin f TFP. In cmparisn t the SFA, the DEA has imprtant advantages as it des nt require any functinal frm fr the prductin functin (Jshi and Singh, 2010). Grifell-Tatje Lvell (1996) has suggested three main advantages f this apprach. First, it des nt require the prfit maximisatin, r cst minimisatin, assumptin. Secnd, it des nt require infrmatin n the input and utput prices. Finally, if the researcher has panel data, it allws the decmpsitin f prductivity changes int tw cmpnents the indices f TFP change (TFPCH), technlgy change (TECHCH), efficiency change (EFFCH), has been used in the present study. Researchers have extensively applied this technique fr the measurement f TFP grwth in the manufacturing industry; therefre, the present study has used this technique t estimate the TFP grwth and its cmpnents in the manufacturing sectr. The MPI, which is an applicatin f DEA t a panel data t calculate was initially intrduced by Caves et al. (1982) and was empirically used by Fare et al. (1992 and1994). In rder t avid chsing the MPI f an arbitrary perid Färe et al. (1994) specified the Malmquist prductivity change index as: M x y x y t + 1 t + 1 t t (,,, ) 1 D x, y D x, y D x y D x y t t + 1 t + 1 t + 1 t + 1 t + 1 t t t t + t t,, (iv) Färe et al. (1994) further states that the MPI frmula in equatin (vi) can be equivalently rewritten as: M x y x y t+ 1 t+ 1 t t (,,, ) (v) The first rati n the right hand side f equatin (v) measures the changes in technical efficiency (EFFCH) between perid t and t+1 as a catching-up t the frntier effect. The secnd term measures (TECHCH) the change in prductin technlgy (i.e., technical change) usually referred t as a shift in prductin frntier. = = D x, y D x, y D x, y t+ 1 t+ 1 t+ 1 t t+ 1 t+ 1 t t t t t t t+ 1 t+ 1 t+ 1 t+ 1 t t D x, y D x, y D x, y 245

6 Sh. Sehgal; S. K. Sharma (vi): D x y Technical Efficiency Change = EC = D x y (vii): Technlgical Change = TC = ( ) D x, y D x, y D x y D x y t t t t t t t+ 1 t+ 1 t+ 1 t+ 1 t t,, The TFP grwth rate can be estimated as: TFPG (Per cent) = (TFPCH-1)* (, ) t t t (, ) t+ t+ t+ Further, it is t be nted that M 0 >1 reflects a psitive TFP grwth between tw cnsecutive years. Similarly, imprvements in any f the cmpnents f M 0 are als assciated with the values greater than unity f these cmpnents, and deteriratin is assciated with the values less than unity. (The terms technlgical prgress, technlgical change and technical change are used interchangeably thrughut the study). Furthermre, even if a sectr experiences deteriratin in efficiency, it culd still end up with a psitive grwth in TFP if the fall in its efficiency is smaller than the imprvement in its technlgy (Kumar and Arra, 2009). RESULTS AND DISSCUSSION At the time f independence, Indian ecnmy was predminantly an agricultural ecnmy while the industrial sectr was lacking seriusly behind. During the first plan perid, the cntributin f the primary sectr in GDP was the largest fllwed by tertiary and secndary sectr. Hwever, ecnmic plicy in pst independence India was strngly influenced by the ideas that there is high degree f crrelatin between the extent f industrializatin in an ecnmy and its ecnmic develpment. A natural cnsequence was that develping cuntries embarked upn the path f industrializatin in rder t get rid f their ecnmic prblems. With the mtive t understand the behavir f the ecnmy in questin, in terms f grwth pattern f GDP, a prxy f verall imprvement in the ecnmy and its cmpnents, a brader picture has been drawn in the table 1. Table 1: Grwth pattern f macr indicatrs f India and Haryana India Haryana Perid-I GDP 5.61* 5.95* Primary Sectr 3.13* 3.32* Secndary 6.21* 6.21* Tertiary 7.10* 8.41* Perid-II GDP 5.40* 6.21* Primary Sectr 3.23* 4.74* Secndary 6.73* 7.21* Tertiary 6.83* 7.74* Perid-III GDP 5.53* 6.81* Primary Sectr 2.71* 2.63* Secndary 5.91* 6.93* Tertiary 7.10* 10.41* Nte: * Statistically significant at 1 percent level f significance 246

7 Int. J. Manag. Sh. Sehgal; Bus. Res., S. K. 1 (4), Sharma , Autumn 2011 A glance at grwth rates f Haryana shws that the state has perfrmed well in cmparisn t All India in all the sectrs with grwth rates mre than natinal average during the perid f 27 years. Hwever, results at the disaggregate level shws that GDP f Haryana has imprved cmparatively in pst refrms perid frm 6.21 per cent in pre refrms perid t 6.81 per cent in pst refrms perid. While tertiary sectr has shwn imprvement in pst liberalizatin era, grwth rate f secndary sectr f Haryana drpped ff frm 7.21 per cent t 6.93 per cent. The differential grwth rates acrss the sectrs have resulted in significant changes in the sectral cmpsitin f GDP. The relative share f the primary, secndary and tertiary sectr is pltted fr India as well as fr the sample state in figures 1 and 2, respectively. The general develpment pattern bserved by the Haryana is definitely nt a healthy sign f structural change in the ecnmy. The analysis f the results reflects that while the tertiary sectrs have maintained its lin s share in GDP f India and Haryana as well, the declining trend in the share f primary sectr grwth rates is nticeable during 27 years and this deceleratin is nt nly at natinal level but als at state level. Whereas the cntributin f secndary sectr has shwn nly a marginal rise and it is an alarming situatin fr the sustainable develpment f the cuntry in general and state in particular. Figure 1: Percentage share f different cmpnents f GDP f India Figure 2: Percentage share f different cmpnents f GDP f Haryana 247

8 Ttal Factr Prductivity Risk Sh. Analysis Sehgal; f in S. Manufacturing E-cmmerce K. Sharma Sectr in India Industrializatin has been viewed as a precnditin fr ecnmic develpment. It is nt nly a generatr f ecnmic grwth, but als serves as the transfrmer f the sciecnmic and institutinal setup f the ecnmy (Arra and Singh, 2008). S, further attempt t prbe int the grwth and pattern f intra- sectr cmpsitin f secndary sectr f India and Haryana has been made. One f the imprtant sub-parts f secndary sectr is manufacturing sectr in any ecnmy. It is widely recgnized as a sectr which has bth the backward and frward linkages with the ther sectrs f the ecnmy. There is a need t recgnize, understand and analyzed its sub-sectrs grwth, with its implicatins fr the sustained lng term grwth and develpment f the cuntry. A glance at table 2 indicates that in the state the grwth rate f manufacturing sectr is mre than the natinal average during pre refrms era but it fall sharply in pst refrms perid. Als the grwth rates f the indicatrs (except cnstructin sectr) pints ut that in cmparisn t All India, ecnmy f Haryana is perfrming better especially fr manufacturing sectr as the grwth rate f the sectr is mre than grwth rate realized at India as a whle. The figure 3 and figure 4 describes the intra- sectr cmpsitin f secndary sectr in India as well as in the state f Haryana, respectively.the time series percentage cntributin f different cmpnents f secndary sectr exhibits that manufacturing sectr has maintained its maximum share in the secndary sectr utput nt nly at all India level but als in the state f Haryana. Malmquist Prductivity Index The develpment f manufacturing industry has been cncmitant with the grwth, i.e., with spectacular ecnmic prgress and rise in the level f living (Arra and Singh, 2008). Level f prductivity grwth is cnsidered t be ne f the mst vital determinants f grwth and develpment. The understanding f inter-tempral and inter-industry cmparisn f its grwth can guide the plicy makers fr the frmulatin f a suitable plicy fr the ratinal resurce allcatin and reginal develpment f the state. Inter-tempral and inter-industry cmparisn f Malmquist Prductivity Index is prvided by the figures 5 and 7. Inter-tempral analysis reveals a cyclical fluctuatin in the prductivity grwth rates fr the manufacturing sectr f Haryana. During a lwest grwth rate f TFP has been bserved in cmparisn t the highest TFP grwth f it during the year During the majrity f the years, the MPI is less than unitary and explaining the level f prductivity fr manufacturing sectr, which is nt very encuraging Table 2: Grwth pattern f secndary sectr and its cmpnents India Haryana Perid-I Manufacturing 6.22* 6.91* Cnstructin 5.71* 3.51* Electricity, Gas and Water Supply 6.82* 8.32* Perid-II Manufacturing 6.90* 9.31* Cnstructin 4.91* 2.31* Electricity, Gas and Water Supply 9.41* 8.41* Perid-III Manufacturing 5.61* 7.12* Cnstructin 6.72* 5.18* Electricity, Gas and Water Supply 5.50* 7.40* Nte: * Statistically significant at 1 per cent level f significance 248

9 Int. J. Manag. Sh. Bus. Sehgal; Res., S. 1 (4), K. Sharma , Autumn 2011 Figure 3: Percentage share f different cmpnents f secndary sectr f India Figure 4: Percentage share f different cmpnents f secndary sectr f Haryana Figure 5: Average f TFPCH, EFFCH and TECHCH: An Inter-tempral analysis 249

10 Sh. Sehgal; S. K. Sharma ne. During the pst refrms era the grwth pattern f MPI reflects relatively better picture. Besides, having a glimpse at the table 3, it is bserved that there is prductivity regress in the manufacturing sectr f Haryana at the rate f per cent per annum. The grwth rate ranges between maximum f 3.65 per cent per annum fr the Grup X i.e. Manufacture f Transprt and with a minimum fr the Grup III i.e. Manufacture f Wd ( per cent). Thus, there exists a huge variatin in prductivity grwth f manufacturing sectr f Haryana. Further, the Manufacture f Transprt and Manufacture f Other Manufacturing Industries are the nly grups which demnstrate a psitive grwth during perid-i. In case f Grup I and III the results are really disquieting as the state s ecnmy significantly cntributed by the agriculture sectr. Fr Fd and Beverages based rganised manufacturing sectr the results f the grwth rates are mre bthersme during the perid-iii. While analyzing the results, it is revealed an imprvement in TFPG as that the prductivity grwth has imprved frm per cent per annum during perid-ii t per cent during perid-iii. Althugh the secnd sub-perid is als reprting prductivity regress, nnetheless the rate f prductivity regress has been held up during the pst refrms perid. Almst all the industrial grups have imprved their TFP during the pst refrms perid except fr Grup I, V and XI, where the grwth rates replicates fall in TFPG. Hwever, it is relevant t pint ut here that during pst refrms perid the industrial grups f Manufacture f Transprt, Manufacture f ther Manufacturing Industries, Manufacture f Cttn and Textile, Manufacture f Paper and Manufacture f Basic Chemicals have exhibited a psitive prductivity grwth. Additinally, t be mre precise, in the state the Grup, X, VI, and, XI in decreasing rder, can be classified as the star perfrmer n the basis f MPI grwth rates fr the perid under study. Decmpsitin f MPI Accrding t MPI apprach, TFP can increase nt nly due t technical prgress i.e. shifting f prductin frntier but als due t the imprvement in TE i.e. catching-up. MPI allws t distinguish between shifts in the frntier i.e. TECHCH, and imprvements in efficiency relative t the available frntier i.e. EFFCH, which are tw mutually exclusive and exhaustive surces f TFP change. The figures 5 and 6, respectively prvide the inter-tempral estimates f efficiency change and technlgical prgress. Table 3: Grwth rate f TFPCH, EFFCH and TECHCH: An Inter-industry analysis TFPCH Grwth Rate EFFCH Grwth Rate TECHCH Grwth Rate Manufacturing Grups Perid-I Perid-II Perid-III Perid-I Perid-II Perid-III Perid-I Perid-II Perid-III Grup I Grup II Grup III Grup IV Grup V Grup VI Grup VII Grup VIII Grup IX Grup X Grup XI Average

11 Int. J. Manag. Sh. Bus. Sehgal; Res., S. 1 K. (4), Sharma , Autumn 2011 Figure 6: Grwth rate f TFPCH, EFFCH and TECHCH: An Inter-tempral analysis A brader visualizatin f the figure 5 explains that technical efficiency change index (EFFCH) is less than unitary fr majrity f the years cnsidered under study. The behaviur f the cefficients f grwth rates summarizes a mix f psitive and negative values. The highest grwth f per cent is experienced during the year ; hwever during the perid-iii the same was per cent ( ). During the last year f the study ( ) grwth rate was per cent thus trend ends with an ptimistic nte fr the technical efficiency change (TECHCH). On the ther hand, the grwth rate f technlgical change is fund t be ptimum during the year (55.66 per cent), while fr the pst refrms era it was maximum during the year (16.28 per cent). An inter industry analysis f EFFCH and TECHCH fr the manufacturing sectr f Haryana is explained by the figures 7 and 8. A cmparative analysis f pre and pst refrms perid suggests that industrial grups f Manufacture f Cttn and Textile have experienced imprvement in technical efficiency frm per cent in pre refrms t per cent during pst refrms perid. During the same time, Manufacture f fd and beverage, Manufacture f wd, Manufacture f machinery and machine tls, Manufacture f transprt, Manufacture f ther manufacturing industries have experienced a decline in EFFCH. Whereas TECHCH has declined during pst refrms perid except grup II, grup IV and grup VI. The analysis shws that ut f 11, 3 grups i.e. Manufacture f Paper, Manufacture f Basic Chemicals and Manufacture f Transprt have experienced technlgical prgress during the perid-i (figure 9). A prbe fr examining the impact f ecnmic refrms highlights that strng psitive technical change is bserved fr all the industries f Haryana barring Grups I,II,III, and V. The Manufacture f Basic Chemicals has remained the mst efficient during the study perid. Hence, suggesting a psitive impact f liberalizatin plicy n technlgical advancement. The table 3 prvides a detail f grwth rate f TEPCH, EFFCH and TECHCH enjyed by different grups f manufacturing industries in the state f Haryana. With the intentin t prepare a cmparative picture f the tw indicatrs, technlgical regress at the rate f per cent has been bserved as the majr surce f prductivity regress fr the aggregate perid f 27 years whereas efficiency regress is bserved t be insignificant and scant surce f TFPG. Hwever, a cmparative analysis f decmpsitin ver the tw sub perids reveals that an imprvement in TECHCH during the pst refrms perid is respnsible fr the bserved prductivity grwth imprvement in the manufacturing sectr f Haryana. The impact f ecnmic refrms n efficiency change has been bserved t be lackluster. Haryana is a capital pr, energy deficient state (Sharma, 2011) presence f inefficiency in the utilizatin f these scarce resurces needs urgent attentin. The rate f grwth f efficiency has decelerated frm 1.39 per cent per annum (table 3) in the pre refrms perid t per cent per annum during the pst refrms perid. During the secnd sub perid the negative efficiency change at the rate f per cent per annum ver weighs the rate f 251

12 Ttal Factr Prductivity Risk Sh. Analysis Sehgal; f S. Manufacturing K. E-cmmerce Sharma Sectr in India Figure 7: Malmquist prductivity index fr the state f Haryana: An Inter-industry analysis Nte : Grup I: Manufacture f Fd and Beverages; Grup II: Manufacture f Cttn and Textile; Grup III: Manufacture f Wd; Grup IV: Manufacture f Paper; Grup V : Manufacture f Leather; Grup VI: Manufacture f Basic Chemical; Grup VII: Manufacture f Rubber; Grup VIII: Manufacture f Nn Metallic and Basic Ally; Grup IX: Manufacture f Machinery and Machine Tls; Grup X: Manufacture f Transprt ; Grup XI: Manufacture f Other Manufacturing Industries. Figure 8: Technical efficiency index fr the state f Haryana: An Inter- industry analysis 252

13 Int. J. Manag. Sh. Bus. Sehgal; Res., S. 1 K. (4), Sharma , Autumn 2011 Figure 9: Technlgical change index fr the state f Haryana: An Inter- industry analysis technlgical change and therefre, prvides a negative prductivity grwth fr the manufacturing sectr f Haryana. Arra and Singh (2008) have als experienced results n the similar lines fr the state f Haryana fr the aggregate manufacturing sectr. Surces f Prductivity Plicy actins intended t imprve the TFPG might be badly misdirected if the plicy makers fcused n accelerating the rate f innvatin in circumstances where the cause f lagging the grwth is lw rate f mastery r diffusin f best practise technlgy (Nishimizer and Page, 1982 as mentined in Kumar and Basu, 2008). Therefre, it is quite essential t knw the surces f TFPG fr a better plicy framewrk. The analysis cnfirms that at the aggregate level the majr surce f the level f TFPG fr the manufacturing sectr f Haryana is the technical efficiency fr the perid-i as described by the table 4. Amng the industrial grups, it is the industrial grup f Manufacture f paper, Manufacture f leather, Manufacture f basic chemical, Manufacture f rubber, Manufacture f Transprt and Manufacture f nn metallic and basic ally, where technlgical advancement dminates the efficiency change and therefre bserved t be the majr drivers f prductivity imprvement f these industries. Hwever, in rest f the industries efficiency change is greater than technical prgress. A cmparisn f pre and pst refrms suggests that during the pst refrms era except fr industrial grup Manufacture f Fd and Beverages and Manufacture f Cttn and Textile, TECHCH is greater than EFFCH in all the ther industrial grups and fr the entire manufacturing sectr as well, which implies that grwth in TFP was due t innvatin rather than imprvement in efficiency. Innvatins in Manufacturing Sectr f Haryana Althugh it has been bserved that technical efficiency change is the dminant surce in the manufacturing sectr f Haryana fr the entire study perid, yet it becmes pertinent t identify fr different years the manufacturing sectr categries which are the best practisers as well as the innvatrs. An innvatr industrial grup is that which has been bserved technically efficient in a given year and als shift its frntier utward in the succeeding year i.e. if the fllwing three cnditins are satisfied then the industrial grup is knwn t be an innvatr (Fare et.al., 1994). The three cnditins are (Kumar and Managi, 2009): t+1 (a) TECH t > 1; t (b) D i (x t+1, y t+1 ) > 1; t+1 (c) D i (x t+1, y t+1 ) = 1 Analysis f Innvatins disclses that ver the perid f time almst all the industries have remained innvative. During the perid-ii frequency cunt (16) is almst equal t perid-iii frequency cunt (17). Thus, the liberalizatin prcess als seems t be psitively affecting the research and develpment in the manufacturing sectr f Haryana. Fr the industrial grups f Manufacture f fd and beverage, Manufacture f leather, Manufacture f machinery and machine tls, Manufacture f Transprt and 253

14 Sh. Sehgal; S. K. Sharma Table 4: Vital indicatrs f prductivity behavir fr the manufacturing sectr f Haryana Manufacturing Grups Surces f TFPG TECHCH > EFFCH Analysis f Innvatins Inter-Tempral and Inter-Industry Analysis f Innvatins Perid-I Perid-II Perid-III Perid-I Perid-II Perid-III Grup I N N N Grup II N N N Grup III N Y Y Grup IV Y Y Y Grup V Y N Y Grup VI Y N Y Grup VII Y N Y Grup VIII Y N Y Grup IX N N Y Grup X Y N Y Grup XI N N Y Aggregate N N Y Nte: Y- Yes and N- N Manufacture f ther manufacturing industries, frequency cunt f innvatins have increased during perid-iii in cmparisn t perid-ii (table 4). On the ther side, fr industrial grups f Manufacture f Cttn and Textile and Manufacture f basic ally and nn metallic, n innvatin is bserved during pre r pst refrms perid implying that innvatin prcess has nt started in these industries. The results als depict that Grup VI i.e. Manufacture f machinery and machine is the mst innvating industrial grup narrwly chased by Manufacture f basic chemical, Manufacture f Wd and Manufacture f leather. CONCLUSION AND SUGGESTIONS The present analysis f TFP measurement in manufacturing sectr f sample state f Haryana is cnfined t the perid frm t The required tw digit level data f manufacturing sectr f Haryana in a balanced panel data frmat fr different types f 11 industry grups f manufacturing industries establishes that verall the state f Haryana is facing prductivity regress. Mrever, the pst refrms perid is als reprting prductivity regress, yet the rate has been slwed dwn during the perid. Decmpsitin f MPI int TECHCH and EFFCH reveals that technical efficiency change is the key driver f TFPG in the manufacturing sectr f Haryana during pre refrms perid, hwever, the picture has turned arund during the pst refrms perid. In sme f the agr based industries like fd and cttn and textile based manufacturing industries, the majr driver f increase in prductivity is efficiency rather than technical prgress during the pst refrms perid. Technlgical change is fund t be greater than efficiency change in all the ther industrial grups and fr the entire manufacturing sectr as well, which implies that grwth in TFP was due t shift in the frntier rather than imprvement in efficiency in Haryana during the pst refrms perid. Hence, suggesting a psitive impact f liberalizatin plicy n technlgical advancement f the manufacturing sectr f the state. Thus, during the pst refrms perid the state has realized inefficiency in the utilizatin f resurces in hand and it is really an alarming sign indicating that the incapability f manufacturing sectr f the state in questin t cpe up with the technlgical advancement. The utcmes als depicts that industrial grup manufacture f machinery and machine is the mst innvating industrial grup intently trailed by Manufacture f basic chemical, Manufacture f Wd and Manufacture f leather. As against this, fr 254

15 Int. J. Manag. Sh. Bus. Sehgal; Res., S. 1 K. (4), Sharma , Autumn 2011 industrial grups f Manufacture f Cttn and Textile and Manufacture f basic ally and nn metallic, there is cmplete absence f innvative experience which reveals a threat f survival in the lng run fr these types f manufacturing industries. The Manufacturer f fd and beverages, Manufacturer f wd, Manufacturer f leather, Manufacturer f rubber, etc. largely during the pst refrms perid have perfrmed prly n prductivity grwth frntage and these categries f industries are facing hindrance n bth the aspects f technlgical change as well as technical efficiency. There is urgent need t take critical scrutiny and cgnizance fr revitalizatin f emerging tendency amng these categries f manufacturing sectr f the Haryana. The cmmuniqué is strident and lucid that fr the state f Haryana, with the purpse t enhance the manufacturing sectr f the ecnmy, there is urgent need t ascertain nt nly strengthening the level f innvatins and ptimum utilizatin f resurces but als critical respnsibility t balance and harmnize bth the abve mentined aspects. This will help t utilize the scarce inputs like capital and lends a hand t walk n the itinerary f rapid develpment f manufacturing sectr and ecnmy at large. REFERENCES Ahulwalia, I. J. (1991). Prductivity and Grwth in Indian Manufacturing, Delhi: Oxfrd University Press. Arra, V. and Parminder, S. (2008). Ecnmic Refrms and Prductivity Grwth in Indian Manufacturing Sectr: An Interstate Analysis, The ICFAI University Jurnal f Industrial Ecnmics, V (3), pp Balakrishnan, P. and Pushpangadan, K. (1994). Ttal Factr Prductivity Grwth in Manufacturing Industry: A Fresh Lk, Ecnmic and Plitical Weekly, 29 (31), pp Caves, D. W., Christensen, L. R. and Diewert, W. E. (1982). The Ecnmic Thery f Index Numbers and the Measurement f Input, Output and Prductivity, Ecnmetrica, 50 (6), pp Fare, R., Grsskpf, S., Nrris, M. and Zhang, Z. (1994). Prductivity Grwth, Technical Prgress and Efficiency Changes in Industrialized Cuntries, American Ecnmic Review, 84, pp Färe, R., and Grsskpf, S. (1992). Malmquist Indexes and Fisher Ideal Indexes, The Ecnmic Jurnal, 102 (410), pp Gldar, B. (1986). Prductivity Grwth in Indian Industry, New Delhi: Allied Publishers,. Gldar, B. and Veeramani, C. (2005). Manufacturing Prductivity in Indian States- Des Investment Climate Matter?, Ecnmic and Plitical Weekly, June 11, pp Grifell-Tatjé, E. and Lvell, C. A. K. (1995). A Nte n the Malmquist Prductivity Index, Ecnmics Letters, 47 (2), pp Jayadevan, C. M. (1995). Inter-State Variatins in Emplyment Grwth Rates: Evidence frm Organized Industry in India, Indian Jurnal f Reginal Science, 27 (1-2), pp Jshi, R. N. and Singh S.P. (2010). Estimatin f Ttal Factr Prductivity in the Indian Garment Industry, Jurnal f Fashin Marketing and Management, 14 (1), pp Krugman, P. (1990), Increasing Returns and Ecnmic Gegraphy, NBER Wrking Papers N Krugman, P. (1994). The Myth f Asia s Miracle, Freign Affairs, 73, pp Kumar and Basu (2008). Perspectives f Prductivity Grwth in Indian Fd Industry: A Data Envelpe Analysis, Internatinal Jurnal f Prductivity and Perfrmance Management, 57(7), pp Kumar, S. and Managi, Sh. (2009). Prductivity and Cnvergence in India: State Level Analysis, MPRA Paper N Available: mpra.ub.uni-muenchen,de Kumar, S. (2006). A Decmpsitin f Ttal Factr Prductivity Grwth: A Reginal Analysis f Indian Industrial Manufacturing Grwth, Wrking Paper, N. 22, NIPFP, New Delhi. Kumar, S. and Arra, N. (2009). Des Inspiratin r Perspiratin Drive the Output Grwth in Manufacturing Sectr? An experience f Indian States, Indian Jurnal f Ecnmics, 89 (4), pp Kumar, S. (2004). Decmpsitin f Ttal Factr Prductivity Grwth: A Reginal Analysis f Indian Industrial Manufacturing Grwth, Wrking Papers, N. 22, Natinal Institute f Public Finance and Plicy. Kuznets, S. (1965). Ecnmic Grwth and Structure: Selected Essays, New Yrk: W W Nrtn and Cmpany Inc. Mahadevan, R. (2002). A DEA Apprach t Understanding the Prductivity Grwth f Malaysia s Manufacturing Industries, Asia Pacific Jurnal f Management, 19 (4), pp Manjappa, D. H., Mahesha, M. (2008). Measurement f Prductivity Grwth, Efficiency Change and Technical Prgress f Selected Capital-intensive and Laburintensive Industries during Refrm Perid in India, Indian Jurnal f Ecnmics and Business, 5 (4), pp Misra, A. (2006). Grwth and Structural Change in Manufacturing Industries Since t , The Jurnal f SRMCEM, 1, pp Ray, S. C. and Desli, E. (1997). Prductivity Grwth, Technical Prgress and Efficiency Change in Industrialized Cuntries: Cmment, American Ecnmic Review, 87(5), pp Ray, S. C. (1997). Reginal Variatin in Prductivity Grwth in Indian Manufacturing: A Nnparametric Analysis, Jurnal f Quantitative Ecnmics, 13 (1), pp

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