Growth and Productivity Performance in Indian Chemical Industry: An Empirical Investigation under New Trade Regime

This paper tries to assess productivity performance in terms of partial factor productivity and total factor productivity growth and tries to depict true snapshot of total factor productivity growth after adjusting economic capacity utilization for the entire period, 1980- 81 to 2003-04. The results of partial factor productivity show improvement in productivity of material, but labour and capital productivity are gradually declining. Using translog index, the result on the overall productivity shows declining total factor productivity growth during post-reform period as compared to pre-reform period. Total output growth in Indian chemical industry is found to be mainly input-driven rather than productivity-driven. After adjusting capacity utilization, TFP growth does not affect its overall movement but remarkably mitigates its variation because variations between subperiods are smaller after adjusting capacity utilization as cyclical factors. The liberalization process is found to have its adverse impact on total factor productivity growth. Finally, analysis of the nature of competition shows that rigidity in the expansion of competition exists in the Indian chemical industry.