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Structure and Performance of Capital Goods Industry in India during the Pre-reform and Post-reform Period

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Swarnjeet Kaur and Swati Mehta

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Abstract

The Indian Journal of Economics and Development (2019) 15(1), 14-27
DOI: 10.5958/2322-0430.2019.00002.7
Indexed in Clarivate Analytics (ESCI)

Swarnjeet Kaur and Swati Mehta

Research Scholar and Assistant Professor, Punjab School of Economics, GuruNanak Dev University, Amritsar-143005
*Corresponding author’s email: swarnjeet765@gmail.com

ABSTRACT
Capital goods are considered as a backbone of the manufacturing industry since independence. India has adopted various policies to improve the capital goods industries. Have capital goods industries grown over the years? Whether its share has improved within the manufacturing amongst use-based industries? Do the partial and total productivities of capital goods industries improve in the postre form period as compared to the pre-reform period? These were the main issues taken up in the present study. Thus capital goods industries were classified into four sub-sectors- electronics industries, electrical machinery industries, non-electrical machinery industries and transport equipment industries consisting of 22 industries. Using industry-level ASI data, a fresh insight has been
presented over the capital goods sector for 35 years long-run time period (from period 1980-81 to 2013-14) which is further divided into the pre-reform and post-reform period. For the detailed analysis of structural changes, shares of the capital goods sector are estimated for use-based classification of manufacturing industries. Further, the paper also provides detailed insights into performance through shares, trend growth rates and partial productivities at the aggregate and disaggregates level. The estimated indicated a decline in trend growth at the aggregate level of capital goods sector in terms of gross value added in all sub-sectors of the capital goods sector. Using the Translog index of growth accounting method, some industries showed a slight increase in total factor productivity growth in the post-reform period. However, at the aggregate level, Total Factor Productivity growth of capital goods sector declined in the post-reform period as compared to the pre-reform period.
Keywords
Capital goods, economic reforms, employment, industries, total factor productivity.