Productivity and technical efficiency in Indian states' manufacturing:: The role of infrastructure

The purpose of this article is to examine the effects of infrastructure on manufacturing industries' total factor productivity (TFP) and technical efficiency (TE) in the case of the Indian states, building on work that has been carried out at the regional level. Using the spatial dimension of the data, which reveal marked disparities in infrastructure endowments across Indian states, we hope to identify more accurately the impact of productive public expenditure on industrial productivity.16 The remainder of this article is organized as follows. In Section II we provide a broad overview of Indian states' manufacturing structure and of the states' differences with regard to infrastructure. In Section III we present our panel data estimates of the manufacturing production functions. In Section IV we compute manufacturing TFP and assess differences in productivity trends across states. In Section V we examine, using a conditional convergence framework across states, the effects of infrastructure on manufacturing TFP. In Section VI we complete this analysis by studying the role of infrastructure as a predictor for differences in manufacturing TE across states, and in Section VII we draw our conclusions.