State Infrastructure and Productive Performance in Indian Manufacturing

We present estimates, at the State level, of Indian manufacturing Total Factor Productivity (TFP) and Technical Efficiency (TE) from the estimation of production functions for 17 manufacturing industries from 1976 to 1992. Our analysis relates TFP and TE to the availability of infrastructure. We construct an aggregate infrastructure indicator from 12 indicators of core, social, and economic infrastructure. According to our findings, differences across States in manufacturing TFP and TE performance are accounted for, to a significant extent, by differences in infrastructure endowments. Our estimations make it possible, moreover, to measure the productive impact of the various types of infrastructure, as well as to identify the manufacturing industries where productivity gains are relatively more constrained by inadequate infrastructure. The findings could help in designing an effective policy of infrastructure investment, supporting both recent economic reforms towards industrial restructuring and efforts aiming to promote regional convergence in India ...