TECHNICAL EFFICIENCY IN THE INDIAN TEXTILES INDUSTRY: A NON-PARAMETRIC ANALYSIS OF FIRM-LEVEL DATA

The Indian textiles industry is now at the crossroads with the phasing out of the quota regime that prevailed under the Multi-Fiber Agreement until the end of 2004. In the face of a full integration of the textiles sector in the WTO, maintaining and enhancing productive efficiency is a precondition for competitiveness of the Indian firms in the new liberalized world market. In this paper, we use data obtained from the Annual Survey of Industries for a number of years to measure the levels of technical efficiency in the Indian textiles industry at the firm level. We use both a grand frontier applicable to all firms and a group frontier specific to firms from any individual state, ownership or organization type in order to evaluate their efficiencies. This permits us to separately identify how locational, proprietary and organizational characteristics of a firm affect its performance.