MANUFACTURING PRODUCTIVITY IN THE INDIAN STATES

In this paper, we study the total factor productivity (TFP) of manufacturing industries in 22 Indian states for the periods 2008-2009 and 2011-2012 using industry data from ASI database. We estimate TFP by ordinary least squares using cross-sectional data. For correcting potential endogeneity, we apply two-stage least-squares approach using intermediate inputs as instruments. Our results show that despite a faster growth in the industries in the sample period, there appear wide regional disparities in the TFP in most industries assessed. We note that low-productivity states display a higher variation in TFP across industries than high-productivity states. Our results also confirm the dominance of capital-intensive techniques in Indian manufacturing. In addition, more importantly, there appears to be no sign of change in elasticity of inputs over the sample period.