Did Economic Reforms Affect Manufacturing Productivity in India?

32 Pages Posted: 25 Feb 2020 Last revised: 27 Jul 2023

See all articles by Partha Chatterjee

Partha Chatterjee

Shiv Nadar University, Department of Economics

Shweta Jain

Shiv Nadar University

Date Written: January 29, 2020


India has witnessed a series of policy reforms since 1991, which aimed to increase productivity of the manufacturing sector. Did these reforms increase productivity in manufacturing plants? We address this question using rich data from the Annual Survey of Industries in India spanning three decades from 1983-84 to 2012-13. We focus on three reforms: delicensing, allowing foreign direct investments, and tariff reduction. We find no systematic or significant impact of the reforms on plant-level productivity in manufacturing. This result holds whether we look at the reforms individually using a difference-in-difference technique or simultaneously using fixed effects. Productivity is correlated with plant size, industry concentration, and misallocation, but we find that the reforms had no significant effect on any of these channels. This sheds light on why the economic reforms in India may have failed to impact productivity.

Keywords: Productivity, Manufacturing, India, Reforms, Size, Misallocation, Competition, Delicensing, Foreign Direct Investment, Tariffs

JEL Classification: L11, O11, O25, O40, O53

Suggested Citation

Chatterjee, Partha and Jain, Shweta, Did Economic Reforms Affect Manufacturing Productivity in India? (January 29, 2020). Available at SSRN: https://ssrn.com/abstract=3527371 or http://dx.doi.org/10.2139/ssrn.3527371

Partha Chatterjee (Contact Author)

Shiv Nadar University, Department of Economics ( email )

NH-91, Village- Chithera, Tehsil-Dadri,
Dist. Gautam Buddha Nagar, UP
Gautam Buddha Nagar, Uttar Pradesh

HOME PAGE: http://https://www.parthachatterjee.net/

Shweta Jain

Shiv Nadar University ( email )

NH-91, Tehsil Dadri
Village Chithera
Uttar Pradesh, Ghaziabad 201314
1800 102 1768 (Phone)

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