Are Indian Firms too Small? A Nonparametric Analysis of Cost Efficiency and Industry Structure of Indian Manufacturing

In this paper we use the 2004-05 Annual Survey of Industries data to estimate the levels of cost efficiency of Indian manufacturing firms in the various states and also get state level measures of industrial organization (IO) efficiency. The empirical results show the presence of considerable cost inefficiency in a majority of the states. Further, we also find that, on average, Indian firms are too small. Consolidating them to attain the optimal scale would further enhance efficiency and lower average cost.

Surplus Labor in Indian Manufacturing: Evidence from the Annual Survey of Industries

In this paper we analyze state level data for total manufacturing constructed from the Annual Survey of Industries for the period 1986-2000 using the nonparametric method of Data Envelopment Analysis (DEA). We assess the extent of surplus labor in the manufacturing sector in the individual states in India. The study also investigates whether the same states show the maximum incidence of surplus labor every year in the sample period and if there any evidence that the extent of surplus labor in manufacturing has been reduced or eliminated in the post-reform era. Our study shows the presence of considerable measure of surplus labor in all of the years in a majority of the states. Things have worsened rather than improved after the reform. Also, the regional distribution of surplus labor has remain fairly unchanged with the same states performing inefficiently both before and after the reform.