Productivity growth in Indian engineering industries during pre-reform and post-reform period an analysis at company level

Abstract

Since July 1991, major economic policy changes have been made under the economic reforms programme. The new policies have relaxed or removed many government controls on production capacity, imported capital goods, intermediate inputs and technology. These reforms have altered the economic environment in which the companies operate. This paper makes a comparative analysis of productivity growth of engineering companies in India in the pre-reform and post-reform periods. The study is based on company level balanced panel data relating to Indian engineering industries, electrical and non-electrical groups, for the pre-reform period of 1985-86 to 1990-91 and post- reform period of 1991-92 to 1994-95. The study reveals that productivity growth of engineering industry had declined in the post- reform period as compared to the pre-reform period. The paper also analyses factors affecting company level productivity growth in the two periods. Various factors are considered to explain inter-company variations in productivity growth during the two periods. The analysis reveals that output growth had a significant positive impact on productivity growth in both the periods. Foreign equity participation had a significant negative relationship with productivity growth in both the periods. Thus domestic companies had a higher productivity growth as compared to foreign owned companies in both the periods. Intermediate inputs imports had a strong positive effect on productivity growth in the post-reform period. Show more