Productivity and technical change in Indian economy

Pohit, Sanjib and Pal, Barun (2011): Productivity and technical change in Indian economy.

Abstract

This paper makes a modest attempt to apply input-output methodology to understand the structural changes in Indian economy in recent years. Our observations cover the period 1998-99 to 2006-07, the latest year for which India’s input-output table is published. Our analysis indicates that most of the manufacturing as well as services sectors exhibit large intermediate input factor productivity growth during the years under observations. Notable among them are electrical machinery, coke, refined petroleum etc, radio, television and communication equipments, machinery and equipments, construction, and hotels and restaurants. Furthermore barring few sectors, most of these sectors registered capital productivity gain during this period.Surprisingly, India has not been able to register significant capital productivity gains in the labour intensive sectors like food products, textile products etc, even though India has comparative advantage in these sectors being a labour rich economy. We find that there is falling labour productivity in many of the labour intensive sectors like agriculture and allied, mining and quarrying, food products, wood products, pulp and paper. On the other hand, our analysis of technical coefficient of India’s input-output table suggests that input cost on agriculture allied activities in food products, beverages sector has progressively fallen over the years. Moreover, we find that input costs on machinery related items in many of our sector are increasing which suggest that economy is on a path of modernisation. This has also helped in reducing energy cost on production.

• Item Type: MPRA Paper
• Language: English
• Keywords: Input-putput; India; total factor productivity growth; technical change
• Subjects: D - Microeconomics > D2 - Production and Organizations; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data ; Data Access; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity

References

Bazzazan, F. 2010. “Benchmarking of Sectoral Productivity Changes in Iran,” Proceedings of the 18th International Input-Output Conference, 20-25 June, 2010, University of Sydney, Australia.

Government of India. 2008. “Input-Output Transaction Table,” Central Statistical Organisation, Ministry of Programme and Implementation.

Kuroda M. & Nomura K. 2004, “Technological Change and Accumulated Capital: A Dynamic Decomposition of Japan’s Growth”, in Dietzenbacher E. & Lahr M. (ed.) Wassily Leontief and Input-output Economics, Cambridge University Press.

OECD. Structural Statistics for other country’s input-output Tables. http://oecd.org.

Pradhan, Basanta K, M.R Saluja and Sing, S.K. 2006. A Social Accounting Matrix for India, Concepts, construction and Applications, Sage Publication, New Delhi.

Solow R. 1957. “Technical Change and Aggregate Production Function,” Review of Economics and Statistics, Vol. LXX, pp. 312-20.

Pal, Barun, Pohit, Pohit and Roy, Joyashree. 2010. “Social Accounting Matrix for India,” revised submitted to Economic Systems Research.

TEN Raa T. 2004. “A Neoclassical Analysis of Total Factor Productivity Using Input-Output Prices,” in Dietzenbacher E. & Lahr M. (ed.) Wassily Leontief and Input-output Economics, Cambridge University Press.