PRODUCTIVITY SPILLOVERS IN INDIAN MANUFACTURING FIRMS

Indian economic reform since early 1990s aims at improving productivity and competitiveness of major industries. The paper examines spillovers from foreign direct investment (FDI), research and development (R&D) and exporting activities on productivity both for foreign and domestic manufacturing firms. The data is obtained from the PROWESS database provided by the Centre for Monitoring Indian Economy (CMIE). Balanced panel of over 1,000 manufacturing firms in India between 1994 and 2006 are considered for our empirical analysis. Findings indicate that foreign presence has a significant spillover effect on the productivity of the Indian manufacturing firms compared to the alternative spillovers such as from R&D and export initiatives.