Imported inputs and productivity: Unraveling the dynamics in India's manufacturing sector

Abstract

This study investigates effects of imported intermediate inputs on firms' productivity in the Indian manufacturing. We use a panel data of manufacturing firms from 2001 to 2021 and adopt the production function approach for analysis. Our results confirm the crucial role of all three imported input types at aggregated and disaggregated levels. However, the productivity effect of imported raw materials is the largest, followed by finished goods and capital inputs. Results show the role of imports is marginally higher for high innovation, specialist‐suppliers and science‐based industries. We also show that spillover effects of foreign technology embodied in imported capital goods.