Total Factor Productivity

Topics: Industry, Manufacturing, Chemical industry Pages: 6 (1768 words) Published: September 11, 2013
Table of Contents
Chapter 1 - Overview5
CHAPTER 2 – Literature review7
Chapter 3 –Results and discussion9
Output trends9
Growth Rates of Total Factor Productivity10
Growth Rates of Total Factor Productivity in Selected Industries10
chapter 4 - CONCLUSION12


Chapter 1 - Overview
Industrial performance of a country needs to be viewed in totality, i.e, with respect to growth of output, employment and productivity. Moreover, productivity levels are as important as productivity growth trends, as both are pertinent in the convergence process. Productivity growth is essential not only to increase output, but also to improve the competitiveness of an industry both in the domestic and international markets. The planning process in India emphasized creation of a well-diversified industrial base and also channeled a significant proportion of resources to meet this end. This was coupled with a host of policy measures to protect the domestic industry which resulted in escalation of costs and lack of competition in India's manufacturing sector. The regulatory framework, inter alia, has been held responsible for low growth rate of productivity of India's manufacturing sector. Liberalization process, therefore, accelerated productivity growth rates. Increasing growth rates of output, productivity and employment in manufacturing sector are important due to their linkages with agricultural and service sectors. From the point of view of sustainability, a higher growth path of output on account of increased total factor productivity is considered to be a preferable alternative as compared with that due to increased application of inputs (Krugman (1994)). However, this can be a contentious issue. If increased productivity is brought about by shrinking employment of labour, it may not bode well for the social fabric of the country and should be a cause for concern to the policy makers. Moreover, the basic objective underlying the argument to increase productivity is to increase social welfare. Thus, rising productivity coupled with shrinking employment of labour may be neither socially desirable nor sustainable. The productivity-driven growth is the growth in output that cannot be explained by the growth in total inputs. It is normally credited to the improvement in knowledge, organizational structure, human resources management, skills attainment, information technologyand efficient use of factors of production. The growth inproductivity, which is also known as total factor productivity growth (TFPG), is the difference betweenthe actual growth of output and the growth due to a composite of all factor inputs (Sehgal et al). Productivity is noteverything, but in the long run it is almost everything (Krugman, 1990). Thus, in the course of time the onlysustained manner to increase per capita gross domestic production (GDP) is possible through increasing theamount of output produced by a given quantity of inputs that is raising total factor productivity (TFP). Productivity growth is accepted as a key characteristic of economic dynamism. It becomes pertinent to analyze the productivity performance of the industrial sector which has alreadyfaced the outside world stiff competition in the era of globalization and liberalization and where the role of government is restricted.

CHAPTER 2 –Literature review
Pushpa et al tried to provide a comparison of growth process not only at inter- state level but also at disaggregated industry level in each state. The focus of the study was on the analysis of inter-state differences in productivity levels and growth rates for specific industry groups during 1980-81 to 2000-01. The industry groups chosen for investigation were:

(i) Textiles and textile products (TEX)
(ii) Metal and metal products (METAL)
(iii) Machinery and transport equipment (MTE)
(iv) Chemical and chemical products (CHEM)
(v) Leather and leather products...

Bibliography: 1. Pushpa Trivedi “An Inter-State Perspective on Manufacturing Productivity in India: 1980-81 to 2000-01”
2. Sehgal et al “Total Factor Productivity of Manufacturing Sector in India: A Regional Analysis for the State of Haryana”
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