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

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Total Factor Productivity Growth and Its Decomposition

This article considers overall total factor productivity improvement achieved by 68 Indian commercial banks from 1998-99 to 2006-07, and breaks it into its components - technical change, technical efficiency change and scale (efficiency) change factor - using the Data Envelopment Analysis methodology. The results suggest that public sector banks, on an average, adjusted to the changing environment better and improved their performance relative to their counterparts under private and foreign ownership. This finding has important policy implications in that the government should be more cautious in liberalising the Indian banking sector and not blindly invite more foreign players to it.

SPECIAL ARTICLE Total Factor Productivity Growth and Its Decomposition The Indian Banking Sector during Liberalisation

Anup Kumar Bhandari

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