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Accounting for Imported Materials Input

Productivity in Indian Manufacturing (1999-2011)

Studies on total factor productivity growth in Indian manufacturing that apply the growth accounting methodology do not distinguish between domestically sourced and imported intermediate inputs, which could bias TFP estimates. Using Annual Survey of Industries data, estimates of TFP growth in Indian manufacturing industries during 1999-2000 to 2011-12 are presented. TFP estimation was done by constructing separate series on domestically procured and imported materials input. Productivity estimates obtained in the study indicate that TFP growth in manufacturing industries during 1999-2011 tends to get understated if imported materials are not separated out from domestically procured materials. For aggregate manufacturing, TFP estimates, corrected for aggregation bias, indicate that there was a rapid growth in productivity.

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