Productivity Performance of Food Processing Enterprises in India: A Data Envelopment Analysis

This study aims at analysing the performance of food processing enterprises in India by estimating the technical efficiency and total factor productivity (TFP) change using Data Envelopment Analysis (DEA). The study is based on firm-level data from the Prowess Database of the Centre for Monitoring Indian Economy (CMIE) for a period of 2005 to 2015. The study also evaluated the performance of major inputs used across food processing firms and identifies the causes of inefficiency across various segments. The analysis clearly indicated that majority of the food processing enterprises were operating at constant returns to scale with only 21 per cent of the industry operating at increasing returns to scale and 14 per cent operating at decreasing returns to scale. The overall TFP of the Indian food processing enterprises increased from 0.976 during 2006–09 to 1.005 during 2010–15 with a mixed sectoral response. The inefficient use of raw material was the major source of slacks in food processing enterprises. The food processing industry faced managerial implications for the policymakers and the manufacturing firms in making decisions for improving productivity and efficiency of food processing enterprises.