Keeping It Simple: Comparative Analysis of TFP across Manufacturing Industries and Major States of India

Abstract

The measurement of total factor productivity in Indian economic development has been greatly debated especially after economic reforms set in. While a fair amount of research is done on this subject, however the findings were lost in the shadow of complex econometric techniques. This paper is an honest attempt to simplify the complex area of productivity for a geographically multifaceted country-India. The paper carries out a comprehensive and comparative TFP (total factor productivity) analysis across 19 major India states and their 15 Indian manufacturing industries. The intent of this paper is fourfold. First, it estimates TFP using a simple technique (growth accounting). Second, it performs the state and the industry level comparative TFP analysis. Third, it discusses the outliers and justifies their outcomes and fourth provides recommendations for policy making and states the implications.