Technical Efficiency in Public and Private Sectors in India: Evidence from the Post-Reform Years

While India's state-owned enterprises are widely believed to be inefficient, there is a dearth of studies that document such inefficiency on any rigorous basis. Yet, since improvement in firm efficiency is one of the basic objectives of privatization, it is important to assess whether efficiency is indeed lower in the public sector than in the private sector. This paper compares the performance of state-owned enterprises with those of private sector firms in respect of technical efficiency. The comparison is made in eight different sectors over the period 1991-92 to 1998-99. We measure technical efficiency using the method of Data Envelopment Analysis. Judging by the average levels of technical efficiency, no conclusive evidence of superior performance on the part of the private sector is found.

Productivity Growth and Efficiency in Indian Banking: A Comparison of Public, Private, and Foreign Banks

India's public sector banks (PSBs) are compared unfavorably with their private sector counterparts, domestic and foreign. This comparison rests, for the most part, on financial measures of performance, and such a comparison provides much of the rationale for privatization of PSBs.In this paper, we attempt a comparison between PSBs and their private sector counterparts based on measures of productivity that use quantities of outputs and inputs. We employ two measures of productivity: Tornqvist and Malmquist total factor productivity growth. We attempt these comparisons over the period 1992-2000, comparing PSBs with both domestic private and foreign banks. Out of a total of four comparisons we have made, there are no differences in three cases, PSBs do better in two, and foreign banks in one. To put it differently, PSBs are seen to be at a disadvantage in only one out of six comparisons. It is difficult, therefore, to sustain the proposition that efficiency and productivity have been lower in public sector banks relative to their peers in the private sector.