Efficiency and Productivity Growth of Food Processing Industry in India : A Malmquist Index Approach

This paper examines sub-sectors wise total factor productivity growth and its components in the Indian Food Processing Industry during pre liberalization and the post-liberalization period and also assesses the impact of new economic policy variables on the productivity and technical efficiency of the industrial sector in India. The study uses data envelopment analysis (DEA) to derive Malmquist productivity indexes. The result indicates that the distribution of employment in different types of food processing units shows that Other Food Items subsector employs 37.1 percent persons out of the total employed in TE-2010. During the last three decades, all segments of the food processing industry experienced a positive change in TFP with varied magnitude, but Meat/Meat Products, Fish/Fish Products, Fruits and Vegetables , and oils& fats experienced a negative change in TFP. The overall TFP change in the Indian food processing industry increased from 0.94 during the pre-liberalization period (1981-1989) to 0.95 during the post-liberalization period (1990-2000) and 1.05 during the liberalization/ globalization period (2001-2010). These results clearly indicate that after market liberalization the capital investments across the food processing industry had significantly increased, after having not been fully utilized in most of the food processing segments in the initial years. This emphasizes the need for identification and implementation of sustainable sources of productivity growth in the agriculture sector of the Indian food processing industry. Therefore, technology is the key to enhancing growth and efficiency in the food processing sector. It is also noticed that there is a wide gap found across the states with respect to productivity growth and efficiency aspects