Trade Liberalization and Industry Level Productivity in Indian Iron-Steel and Cement Industries: Evidences from Post-Reform Period

Abstract

The productivity growth has an important linkage with economic growth and standard of living. It not only increases output but also improves the efficiency level of firms/industries through better utilization of factors of production, and therefore public policies aim at improving productivity. This paper focusses on estimating productivity in iron-steel and cement industries in India and examines the impact of trade liberalization on productivity. The period of the study is from 1991-92 to 2012-13 which is sub-divided into two sub-periods; from 1991-92 to 2001-02 and from 2002-03 to 2012-13. Productivity has been estimated using Malmquist Productivity Index method. The productivity growth in ironsteel and cement industries are 1.4 percent and negative 0.7 percent respectively during the entire period of the study. It has been found that productivity growth of iron-steel has declined in sub period-2 from sub period-1, while that of the cement industry has improved a little during the same period. As far as the impact of trade liberalization measures on productivity is concerned, it has been found that declined input-tariff, output-tariff and effective rate of protection and increase trade openness leads to significant increase in productivity. The paper also concludes the positive impact of increase in construction growth rate and decline in rate of interest and inflation rate.