Trajectory of Manufacturing Industry in India since Post Reform Period

Abstract

Manufacturing has been an engine of growth in India in the seventies and eighties. After the 1991 reforms the engine appears to be slowing. This paper attempts to examine the reality behind the increased productivity by applying methods that measure productivity per factor and returns to scale. The analysis reveals that manufacturing output growth in post reform period is ‘input-driven’ rather than efficiency driven. The growth in manufacturing sector is dependent on the investment climate. The structural reforms since 1990s have made some progress. Despite recent setbacks, it is universally acknowledged that the reforms process in India cannot be reversed and sooner or later these reforms will be implemented. However, the long term competitive ability of Indian firms would depend on production efficiency. Production efficiency, in turn, is dependent on ability to develop, import and adapt new technologies among other factors. Hence, for achieving the efficiency the theories have been critically examined from Indian scenario and some measures have suggested in this paper.