Economic Reforms and the Performance of Indian Manufacturing: An Inter-State Analysis

Date of Completion

January 2012


Economics, General




The impact of Economic Reforms of 1991 on Indian manufacturing has been a subject of intense debate among empirical analysts in last two decades. This dissertation contributes to this area by presenting three studies which examine (i) whether the reforms accelerated total factor productivity growth in Indian manufacturing (organized) in different Indian states and (ii) if all the impact of economic reforms of 1991 is channeled through better capacity utilization alone. ^ We measure the Malmquist Index of total factor productivity using the non-parametric method of Data Envelopment Analysis (DEA) and provide a complete decomposition of it into its likely sources – technical change index, technical efficiency change index, and scale efficiency change index. ^ Our results confirm that economic reforms of 1991 enhanced productivity in total manufacturing at the regional and the national levels and technical progress was mainly responsible for this productivity growth after the reforms. Also, results from the industry level analysis provide evidence of favorable impacts of these reforms for most of the manufacturing industries. However, the impact of the reforms was not uniform across industries. The sources of productivity growth also differ across the industries. Finally, a statistical Analysis confirms that there was evidence of a favorable impact of economic reforms beyond the positive impact of improved capacity utilization on productivity growth in the total manufacturing sector of India. ^