Components of Productivity Growth of the Manufacturing Industries of Petroleum and Coal Products in India: An Interstate Analysis

Abstract

The study applies stochastic frontier approach to estimate and decompose the sources of total factor productivity growth (TFPG) of the 2-digit manufacturing industries of petroleum and coal products in fifteen major industrialized states in India as well as in All-India during the period from 1981-82 to 2010-11, during the entire period, during the pre-reform period (1981-82 to 1990-91) and post-reform period (1991-92 to 2010-11), and also during two different decades of the post-reform period, i.e., during 1991-92 to 2000-01 and 2001-02 to 2010-11. The components of TFPG are: technological progress (TP), technical efficiency change (TEC), economic scale change (SC) and allocation efficiency change (AEC). According to the estimated results, technological progress (TP) is the major contributing factor to TFPG of the organized manufacturing industries of petroleum and coal products in India and in its fifteen major industrializes states during 1981-82 to 2010-11. Further, TFPG of the 2-digit manufacturing industries of petroleum and coal products in India and in its fifteen major industrialized states declined during the post-reform period and the decline in TFPG of these 2-digit industries during that period is mainly accounted for by the decline in TP of the same during that period. However, allocation efficiency change (AEC) and economic scale change (SC) of them remain very negligible or even negative too in many states under study. Further, TEC of them remain unchanged or it is time invariant in nature as statistical tests suggest. So that increase in the combined effect of AEC and SC of them could not offset the decrease in their TP during that period. As a result TFPG of the 2-digit manufacturing industries of petroleum and coal products declined in India and its fifteen major industrialized states during the post-reform period.