In this paper, an attempt has been made to analyze the production structure of the Indian textile industry by estimating a translog production function, in which capital, labor, energy, materials and liberalization index (a proxy for technology, reduced trade restrictions, technology penetration) are the input determinants. This study refers to the period of 1979-2002 and a separate analysis has been carried out for the pre- (1979-1991) as well as post- (1991-2001 liberalization. The results reveal that the post-liberalization growth in productivity is less than that of the pre-liberalization productivity growth. The factors that influence productivity are also identified. The entrepreneurial skill ratios are negative and low during all the periods for both the industries. The Translog Production Function (TPF) has been estimated and marginal productivities are low compared to that of the pre-liberalization period.
Textile
industry occupies a unique place in the Indian economy
and is contributing 14% of the total industrial
production. The industry contributes to nearly 30%
of the total exports and is the second largest employment
generator after agriculture. Since the World Trade
Organization (WTO) has phased out the countries'
import quotas on textiles and apparel on January
1, 2005, the Indian Textile industry is facing increasingly
intense competition in markets both at home and
abroad, especially from other exporting developing
countries.
Most
of the researchers have studied the textile performance
as a part of total Indian manufacturing sector.
The existing studies on textile industry in India
seem to focus on issues such as growth prospects
(Maurice Landes, 2005), cost and productivity (Danish,
2004), post agreement (Hildegunn, 2004), WTO and
the politics of reform (D'Souza, 2004), productivity
trend in cotton textiles (Soumyendra, 2002), efficiency
and technology (Rakesh, 2000-2001), sickness (Anubhai,
1998), market resurgence, deregulation and industrial
response (Roy, 1996), performance (Sastry, 1986),
demand and supply (Goswami, 1985).
Most
of the studies have used time variable as the factor
that captures the technology. We felt that the liberalization
is the right proxy that captures technology transfer,
knowledge transfer, R&D expenditure, reduction
in trade barriers and reductions in capital controls
or other barriers. The proxy we used is the import
penetration ratio of imports to value of output
as a more direct measure of industry specific liberalization
index. As the country reduces trade restrictions,
we would expect to see its import penetration ratio
to rise and would help the manufacturing sector
to import new technology or lead to innovations.
Most of the studies just discussed whether the growth
in productivity has decreased after liberalization
and have not concentrated on the factors that have
influenced the productivity. |
