Technical Efficiency in the Small Scale Industrial Sectors of Punjab and Haryana - A Comparative Analysis

The present study deals with the inter-temporal variations of technical efficiency in the small scale industrial sector of Punjab and Haryana and compares the performance of both states with the small scale industrial sector of India. Data spanning over the period 1972-73 to 2006-07 has been utilized to estimate technical efficiency with the help of data envelopment analysis (DEA) based upon efficiency scores. The empirical analysis confirms that there exists 0.176 percent and 0.470 percent technical inefficiency in the small scale industrial sectors of Punjab and Haryana, respectively. However, at the aggregated All-India level, the technical inefficiency score is 0.449. Thus, the small scale industrial sector of Punjab is comparatively more efficient than that of Haryana and All-India. Moreover, the reform process has adversely affected both the managerial and scale efficiencies of Haryana, whereas an improvement in managerial efficiency has been observed in the small scale industrial sectors of Punjab and All-India. The empirical analysis showed that in the post-reform period both at the All-India level and in Haryana technical inefficiency scores are increasing, whereas in Punjab it is decreasing. Thus, it can be inferred that scale efficiency is an important determinant of technical efficiency in explaining the performance of the small scale industrial sectors of Punjab and Haryana.