Econometric Analysis of Efficiency in Indian Cement Industry

Abstract

This article tries to assess total factor productivity performance and efficiency growth pattern for cement industry in India for the period, 1979-80 to 2008-09. Malmquist Data Envelopment Analysis (DEA) has been adopted to estimate different performance measures viz. productivity growth, technological change, and technical efficiency change for the entire period. We have observed that there is an accelerating trend in productivity during post-reform period. Industry also experienced increase in technological progress along with stagnation in technical efficiency. It was found in this study that the increasing technical change along with non- responding technical efficiency change were the main ingredients responsible for accelerating productivity change in India's cement industry. Moreover, the results allow us to conclude that gross mark up and growth in output, foreign direct investment (FDI) variables have significant positive impact on total factor productivity growth but openness impacted negatively which is beyond our expectation. In this sector, there is an urgent need to improve both technical efficiency and technological progress.

Key words: Cement, India, Industry, Total Factor Productivity, Malmquist Index, technical change, efficiency change.