Productivity and efficiency of labour intensive manufacturing industries in India: An empirical analysis

Abstract

Purpose

This paper aims to make an attempt to identify labour intensity of organized manufacturing industries in India using the Annual Survey of Industry (ASI) data at three-digit level. It estimates total factor productivity growth (TFPG) and technical efficiency for both labour intensive and all manufacturing industries during the pre- and post-reforms periods.

Design/methodology/approach

The study uses three approaches to estimate TFPG. They are growth accounting (GA) (non-parametric), production function with correction for endogeneity – Levinsohn-Petrin (LP) (semi-parametric) and stochastic production frontier (SPF) analysis (parametric). The study uses ASI data published by Central Statistical Organization, Government of India for the period 1980-1981 to 2007-2008 for the analysis.

Findings

The study finds that the rate of decline of the labour intensity is more pronounced in the case of labour-intensive industries than all the manufacturing industries. The results of GA method suggest that the TFPG of labour-intensive industries has declined continuously from the pre-reforms period to the post-reforms period. Similarly, LP method indicates a continuous decline in TFPG of labour-intensive manufacturing industries during the post-reforms period. Interestingly, the results of SPF method also corroborate the findings of earlier two methods at the aggregate level but vary at a certain degree at the disaggregated level.

Originality/value

This paper is useful in the context of India considering the importance given to labour-intensive industries by the present government in terms of reviving the sector and improving the productivity and output.

Citation

Parida, P.C. and Pradhan, K.C. (2016), "Productivity and efficiency of labour intensive manufacturing industries in India: An empirical analysis", International Journal of Development Issues, Vol. 15 No. 2, pp. 130-152. https://doi.org/10.1108/IJDI-12-2015-0081