Aggregate Productivity Growth in Indian Manufacturing: An Application of Domar Aggregation

Productivity growth in Indian manufacturing is an important driver of overall growth, yet the issues related to its measurement have still not been resolved. The issue of how to compute an aggregate productivity measure holds significance for two reasons: one, the productivity of a firm should reflect the productivity of the lower levels, which comprise the aggregate; and two, aggregate productivity should also emphasize the importance of inter-industry transactions in an analysis of productivity growth. We have made an attempt to compute the aggregate productivity growth using the Domar aggregation technique. Comparing the estimates based on the Domar aggregation technique with those based on the traditional aggregate value added approach, we observe that the preferred estimates are about half of those obtained by the traditional aggregate value added method.