The Impacts of Economic Reforms on Efficiency Improvement and Technological Progress in Indian Manufacturing

This paper applied the Malmquist productivity index in order to estimate total factor productivity growth and its components (efficiency change and technological progress) in Indian manufacturing during the pre- and post-reform periods. The results illustrate that the economic reforms have not exerted positive effects on productivity growth in Indian manufacturing. However, the impacts of economic reforms differ between sectors and between components of total factor productivity. First, after reform, the productivity of heavy industries increased, whereas the productivity of light industries decreased. Second, reform improves both the efficiency and the technological progress in the heavy industries, but failed to improve efficiency in light industries. The results of this study suggest that specific policies should be implemented in order to improve efficiency as well as technical progress, thus ultimately facilitating long-run productivity growth.