An Analysis of MSME’s Efficiency: A Study of Two Comparable Northern Indian Regions

Abstract

Jammu and Kashmir (J&K) and Himachal Pradesh (HP) are the two northern states of the Indian union. The two neighbouring states are mountainous and backward as compared to the rest of the country. Of the two, J&K has more natural resources and population. On the contrary, HP, over time, has demonstrated higher outcomes in terms of basic indicators, gross state domestic product (GSDP) and economic growth. This article examines these two economies and attempts to compare them on the basis of their respective efficiencies in industrial production. Although data on GSDP show that HP has grown over time and has surpassed that of J&K in 2017–2018, technical efficiencies of the two regions, as drawn from Annual Survey of Industries (2017), are low and converging. Stochastic frontier results demonstrate that industrialisation in both regions is labour-intensive. Tobit regression results point to low contribution of inputs towards technical efficiency. Also, minimal use of communication and technology, low profits and weak policies contribute negatively in the direction of the technical efficiency of the firms in the two regions. The results specifically imply that in the region of J&K, government support and interventions are needed to address both endogenous and exogenous factors contributing to firms’ inefficiencies.

The Cold-store Industry of Jammu and Kashmir: Beginning, Growth and Linkages

“…The technology purchased by this unit is considered to be state of the art and is the most sophisticated cold-store unit located in J&K. Interestingly, some of the units under study are actively carrying out firm-specific research and development. Studies like Majeed et al (2021) validate the fact that the firm-specific research and development in India is very much limited. However, given the levels of investments that go into the setting up of the cold-store units and the level of R&D and technology utilised, innovation and R&D at the firm level find serious grounds.…”

“…The average number of employees in a cold-store unit of J&K is 144. Comparing it with a number of studies like Majeed et al (2021), it can be concluded that the cold-store units have a huge employment generation potential as compared to the rest of the indigenous and local industries. The supervisors of the cold-store units are not the entrepreneurs but the technical and skilled staff that run the machinery.…”

“…It was only during the early 1950s that a proper development process, viz., the channel of industrialisation, was set in motion and placed across the region of J&K (Khan et al, 2021; Majeed et al, 2021). In the state-led industrialisation, it was contended that the benefits of the industrialisation process are beaten and equitably distributed amongst the population through socialist means (Abdullah, 1944).…”

“…The policies of the central and state governments have been diverse and ever changing, creating a ridge and rift in development. While on one extreme of the industrialisation trajectory lie the industrially developed Maharashtra and Tamil Nadu, on the very other extreme lie states such as Himachal Pradesh and Jammu and Kashmir (J&K) (Majeed et al, 2021).…”

Policy Plans for the Long-Run Sustainable Industrialization Process in Jammu and Kashmir India A Post-2018 Trajectory Setting-Up

“…Studies like Majeed et al (2021a) have already validated the fact that the industrialization process in the region of J&K is dominated by the Micro, Small and Medium Enterprises (MSMEs, henceforth). Neither the ASI data under study nor any other source validates the existence and presence of large units or multinational corporations in the region.…”