Dynamics of Productivity in Indian Manufacturing Industries

Abstract

Since the Great Depression of 1930s, a spontaneous upsurge of interest has developed in measuring the performance of an economy by taking into account data on national income and productivity. The direction in which the economy is heading at a given period of time can be known provided there is a workable knowledge of various indicators such as national income. In case of analysis of produc tivity to gauge relative performance of individual enterprises a similar interest is discernible in various countries. For main taining and sustaining a higher level of performance it is impera tive that the productivity process is so geared and organised as to yield an optimum and progressively higher reinvestment potential in future. The surplus that the economy generates depends primarily on the qualitative, quantitative and efficient use of inputs in a system. An appropriate index of efficiency in the resource use is provided by the various productivity measures. Productivityanaly sis, thus, acquires great significance in the context of the growth of developing economies. In its wide sense, the concept of produc tivity refers to the relationship between economic resources used in production and the resultant output of goods and services. Productivity is thus, a war on waste and inefficiency; it is a way of life and an attitude of mind; it is a constant and continuous effort at improving things. The drive or movement for higher productivity is the need of the day and the entrepreneurs whether they are in industry, agriculture or tertiary sectors should be conscious and fully aware of making economic use of scarce resources of a nation. An atmosphere of ----

productivity culture should prevail so that the targets of the enterprise and the nation as a whole may be attained. Productivity can be measured conventionally using indices like labour and capital productivity. A single yardstick to measure the productivity of any, manufacturing system, with so many inputs is really an oversimplification. One way to overcome this drawback is to compare output to a weighted combination of various inputs such as labour, capital, materials and various other inputs. This is called total factor productivity. The present study uses both partial and total factor productivity indices for analysing the trends in productivity in Indian manufacturing industries from 1973-74 to 1992-93. Partial productivity ratios show unit factor requirement or savings in the use of factors of production and total factor productivity indices indicate the overall efficiency in each industry. A detailed analysis of growth ratios of factor inputs (labour and capital), value added, labour productivity, capital productivity, capital intensity and total factor produc tivity is carried out for aggregate manufacturing sector and for two digit and three digit industries for the entire period, 1973 74 to 1992-93 as well as for sub periods, period I, 1973-74 to 1980 81 and period II, 1981-82 to 1992-93. Capital-output ratios play an important role in dynamic growth models. This study examines trends in aggregate capital-output ratios and trends in capital output ratios in different sectors. An attempt is also made to trace the factors that influence productiv ity. Ordinary least square and stepwise regression techniques are used for analysing the factors affecting productivity.

The estimates for total factor productivity growth rates for dif ferent sectors are generally quite low. A detailed analysis for pre-eighties and eighties onwards era shows that performance in terms of partial productivity and total factor productivity has improved in the latter period in aggregate manufacturing as well as for most of the sectors. The eighties onwards period is marked by an increase in value added in most of the industries. There are substantial variations in performance of various sectors. Water works and supply, gas and steam, cold storage, transport equipment and parts, nonmetallic mineral products and chemicals and chemical products show better performance than others on productivity front. The performance of cotton textiles, jute textiles, electrical ma chinery and repair group is sluggish over the period. For the period under consideration gross capital coefficients are more stable overtime than the net coefficients Interindustry variations in capital coefficients are quite high. Output growth and total emoluments turn out to be the most important factors affecting productivity. The regression results show that coefficients for output growth variable are positive and significant in all the industries. A positive relationship has also been observed between total emoluments and total factor productivity. The analysis of the performance of the manufacturing sector draws attention to the low capital productivity. It is a matter of grave concern since it reflects low efficiency in the utilisation of capital. A sincere effort is needed to improve capital productiv ity