Analysis of Technical Efficiency and Total Factor Productivity of the Indian Textile Industry using Hicks-Moorsteen and Fare-Primont Productivity Indices

Abstract

This paper examines the change in technical efficiency and total factor productivity of the Indian textile industry at the firm level for the period 2005 to 2016, covering the post-Multi Fibre Agreement (MFA) regime. The study draws on data from the Centre for Monitoring Indian Economy (CMIE) Prowess database for 30 selected companies and for the industry as a whole. Two productivity indices, namely the Hicks-Moorsteen index and the Fare-Primont index, are employed to evaluate the technical efficiency and total factor productivity of the industry. The findings reveal mixed results in terms of input-oriented technical efficiency (ITE) and total factor productivity (TFP) over the study period. While some of the selected firms recorded an improvement in TFP and ITE, others experienced a decline in TFP. The study also estimates TFP and ITE for the industry as a whole, and the results indicate an improvement in TFP but no change in the level of ITE throughout the study period.