Is Growth of Output and Productivity in Indian Manufacturing Industries Sustainable? A Cost Function Approach with Adjustment for Capacity Utilization: 1980–1981 to 2016–2017

Abstract

This study attempts to analyze energy intensity, capacity utilization (CU), output and productivity growth of aggregate manufacturing sector in India during the period 1980–1981 to 2016–2017. A decadal analysis as well as a comparison between pre- and post-liberalization period of productivity growth is also made. Total factor productivity growth (TFPG) is also adjusted with CU to obtain adjusted TFPG. The trend in energy intensity is also analyzed to answer the question of sustainability. Results shows that TFPG declined in the post-reform period, highlighting the fact that liberalization process has its adverse impact on productivity growth. From the study it is observed that a declining trend in adjusted TFPG in the post-reform period, but the rate of decline is higher. Energy intensity and CU of the Indian manufacturing industries is found to be increasing over the study period. Increasing energy intensity, quite significantly, would increase the level of pollution generated by the manufacturing industries. So, interestingly enough, this may lead to conclude that the growth of the manufacturing industries is not in line with the basic essence of sustainable development.

Citation

Pal, M.K. and Bera, P. (2022), "Is Growth of Output and Productivity in Indian Manufacturing Industries Sustainable? A Cost Function Approach with Adjustment for Capacity Utilization: 1980–1981 to 2016–2017", Chakraborty, C. and Pal, D. (Ed.) Environmental Sustainability, Growth Trajectory and Gender: Contemporary Issues of Developing Economies, Emerald Publishing Limited, Leeds, pp. 105-118. https://doi.org/10.1108/978-1-80262-153-220221009