ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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TFPG in Manufacturing Industry

TFPG in Manufacturing Industry P Balakrishnan K Pushpangadan IN the light of at least one [Sastry 1995] response to our original article that appeared since our last [Balakrishnan and Pushpangadan 1995] note we would first like to offer some observations on the question of the plausibility of our estimates of TFP growth in Indian manufacturing industry in recent years. Next, we reply in detail to the most recent comment of R and B Dholakia [Dholakia and Dholakia 1995] In general, our point that double deflation is superior to single deflation as a procedure to arrive at real value added appears to have been well taken. However, there appears to be an unease among some at finding the consequent estimates indicating a slower growth of value added in the 1980s since this is widely, and correctly, perceived to be a period of expansionary macroeconomic policy. However, we see no problem, whatsoever, in reconciling our results with the recent trajectory of the Indian economy. The 1980s might well have seen a faster growth of production along with a slower growth of value added. In fact, in a period of a secular decline in the price of raw materials, as occurred in the 1980s,1 this is exactly what would be the prediction when using a neo-classical production function.

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