On Measuring Productivity Growth in Indian Industry: Analysis of Organized and Unorganized Sector in Selected Major States

The Indian industrial sector has gone through various phases since independence. During the late 1970s and 1980s, there was a stagnation in the Indian industrial production. The slowdown in industrial production observed during the 1980s was primarily on account of low productivity. There was persistence of high costs on account of adoption of obsolete technology and low quality of production. However, progress in the process of deregulation was initiated during the 1980s.

The major reforms in Indian Industrial sector were witnessed during the 1990s. For instance, in 1991, there was a gradual dismantling of industrial licensing, removal of import licensing from nearly all manufactured intermediate and capital goods, tariff reduction and relaxation of rules for foreign investment. The reforms in respect of the industrial sector were intended to free the sector from barriers to entry and from other restrictions to expansion, diversification and modification so as to improve the efficiency, productivity, and international competitiveness of the Indian industry. Against this backdrop, the paper makes an attempt to examine the impact of reforms on Industrial sector (both organized and unorganized sector) in India during the reforms period by adopting both partial factor productivity and total factor productivity approach. Further, to identify the role of technical efficiency and technical change, attempt has been made to decompose total factor productivity growth (henceforth, TFPG) into technical change and efficiency change by using Malmquist index.

The paper is organized as follows: Sect. 4.2 deals with data base and methodology adopted while in Sect. 4.3, the growth performance of the Indian manufacturing sector has been discussed. In Sect. 4.4 an attempt is made to examine the productivity performance of the organized and unorganized manufacturing sectors while Sect. 4.5 deals with policy issues followed by summary and conclusion in Sect. 4.6.