A Comparative Analysis of Sources of Output Growth, Factor Substitution and Technical Progress in the Manufacturing Industries of India vis-à-vis the USA

Productivity and the factors of production are the two sources of output growth in an economy. Productivity growth in a purely engineering terminology generally arises from technological improvements. Indeed, it is important for a society to have a stable and positive long-term productivity growth rate, because the associated gains lead to improvements in living standards. It is primarily an advance in the state of knowledge through technological change that paves ways for productivity growth over long periods of time.The rate of growth of output of the manufacturing sector is primarily determined by the rate of expansion in the productive resources, the relative factor productivity levels and the economies of scale. Studies also have examined the role of technical progress on output expansion. Since, there are constraints on resource expansion in developing economies, studies have stressed the need to improve factor use patterns and technical efficiency in the use of resources in accelerating the phase of output expansion in the industrial manufactures. An attempt is made in this paper to trace the sources of output growth, factor substitution and estimates of Hicks’ neutral technical progress for twenty-four three digit level dis-aggregation of industries for India vis-à-vis the USA during the period 1985-86 to 2006- 2007