The Role of Services in Total Productivity Growth of Indian Manufacturing Firms: A Firm Level Analysis Since 2000

Abstract

Services were considered non-tradable in the initial stages (in the mid-eighties). However, with the advent of Information Communication and Technology (ICT) and other modern services, services have become increasingly tradable day by day. Since, the eighties, there had been a rapid expansion of the Indian service sector, surpassing the agriculture and manufacturing sector. With the expansion, important services like communication, financial, transport, insurance, research and development, business services, legal services and other professional services etc. were on high demand in the manufacturing sector. Absence of such important services would act as a bottleneck in major investment projects of a manufacturing firm. Specialized services obtained from the external agency would help the firm to focus on its non-core activities and improve its productivity growth and competitiveness. Against this backdrop, the study mainly examines the role of services in enhancing the productivity growth of the Indian Manufacturing firms since 2000. The firm level data was collected from Prowess database. The study was done at the aggregate and disaggregated level. The results conclude that services have been playing a positive role in enhancing the productivity growth of the manufacturing sector and also for the industry group like textile group, machinery group etc. However, for the Electronics Group services did not play a significant role so far.

Services input and productivity in Indian manufacturing plants

“…The coefficients of the two services input intensity variables are positive as expected. This finding is consistent with the findings of Mukherjee (2017, 2018). It may be inferred accordingly that increased use of services in manufacturing plants tends to raise productivity.…”

“…It may be added here that Goldar and Suresh (2017) have taken the share of imported materials in total materials used as an explanatory variable is a production function estimated for Indian manufacturing plants based on cross-section data for one year and have found that increases in the share of imported materials lead to increases in TFP. Mukherjee (2017) has regressed TFP of industrial firms on a set of explanatory variables including the share of imported materials in total materials consumed and has found a positive relationship between imported materials intensity and TFP. Similar findings have been reported in the study undertaken by Satpathy et al (2017).…”

“…But, there are other studies undertaken for Indian manufacturing, which have focussed on the first channel. These include Banga and Goldar (2007) and Mukherjee (2017, 2018). Based on their analysis using industry-level data drawn from ASI, Banga and Goldar (2007) have come to the conclusion that increased use of services input in Indian manufacturing has had a positive effect on productivity.…”

“…Based on their analysis using industry-level data drawn from ASI, Banga and Goldar (2007) have come to the conclusion that increased use of services input in Indian manufacturing has had a positive effect on productivity. More recently, the link between services input and manufacturing firms’ productivity in India has been investigated by Mukherjee (2017, 2018) using company-level data taken from the Prowess database. She has found a positive effect of services input on the level of productivity in Indian manufacturing firms.…”

Propagating Transparency and Accountability Through Integrated Reporting: An Empirical Insight From a Developing Country

“…The role of integrated reporting is to visualize the relationship between an organization's governance, business strategy, and business model while giving a detailed analysis of the impact and relationship of both financial and non-financial opportunities, risk and performance across the value chain (IIRC, 2013;Robertson & Samy, 2015;Mukherjee 2017). An early adopter of integrated reporting is South Africa that took steps to mandate such reports for companies listed on the Johannesburg Securities Exchange (JSE) starting from March 2010 on an "apply or explain" basis (KPMG, 2011;Lodhia, 2015;Neelam, Subhash, Mahesh, & Anh Vu, 2015;Obiekwe, 2018).…”