Growth and Productivity Performance in Indian Chemical Industry: An Empirical Investigation under New Trade Regime

Abstract

This paper tries to assess productivity performance in terms of

partial factor productivity and total factor productivity growth and

tries to depict true snapshot of total factor productivity growth after

adjusting economic capacity utilization for the entire period, 1980-

81 to 2003-04. The results of partial factor productivity show improvement

in productivity of material, but labour and capital productivity

are gradually declining. Using translog index, the result on

the overall productivity shows declining total factor productivity

growth during post-reform period as compared to pre-reform period.

Total output growth in Indian chemical industry is found to be mainly

input-driven rather than productivity-driven. After adjusting capacity

utilization, TFP growth does not affect its overall movement but

remarkably mitigates its variation because variations between subperiods

are smaller after adjusting capacity utilization as cyclical

factors. The liberalization process is found to have its adverse impact

on total factor productivity growth. Finally, analysis of the nature of

competition shows that rigidity in the expansion of competition exists

in the Indian chemical industry.