Effect of Climate Change and Agricultural Factors on the Technical Efficiency of the Industrial Sector Across Indian States

Abstract

This chapter estimates the TE of the industrial sector across Indian states using a stochastic frontier analysis. It also observes the impact of climatic and agricultural factors on gross value added (GVA) and TE of the industrial sector using a log-linear regression model. Annual average values of maximum and minimum temperature, precipitation and actual rainfall are considered as climatic factors, and irrigated area, cropping intensity, gross sown area, and credit deposit ratio are used as control variables in the empirical model. It compiles state-wise panel data of mentioned variables during 1991 – 2021. The results reveal that there is significant diversity in TE across states. TE and GVA are negatively impacted due to climate change. Gross irrigated area, cropping intensity, and gross sown showed a significant impact on TE and GVA. It provides policy proposals to reduce diversity in TE of industries across Indian states.