Total factor productivity of Indian corporate manufacturing sector.

Manonmani, M.

Introduction

As a reaction to the colonial past, India's development strategy focused on self- reliance. In pursuit of the same, it placed a heavy emphasis on the creation of a well- diversified industrial base to realize the dream of industry-led development. Though this strategy assigned the prime responsibility of developing heavy industries to the public sector, private sector was also allowed to play a supplementary role. Almost until the beginning of the eighties, a myriad of measures to control the private sector, such as, licensing requirement for installation of capacities, quantitative and tariff restrictions on imported inputs, regulation of monopolies and restrictive trade practices, foreign exchange regulation, nationalization of commercial banks and price controls, constituted an integral part of India's industrial policy. The socialistic fervor in the minds of policy makers got reflected in the policy measure, such as, reservation of labor-intensive manufacturing products for the small scale industries (SSIs), preferential treatment to the SSIs and stringent labor laws against firing of labor in large firms. The industrial policy was primarily designed to protect the 'infant' industries from external competition. Unfortunately, the policy inhibited internal competition as well. By the end of seventies, Indian manufacturing suffered from high costs of production, sub-standard quality of products and lack of competitiveness of its exports. It is no surprise that the regulatory framework of the pre-1980s, inter alia, has been held responsible for the low growth rate of output and productivity of India's manufacturing sector (Pushpa Trivedi et. al, 2011).

The first bout of industrial policy reforms that were initiated in the eighties attempted to lift the economy from industrial stagnation through measures, such as removal of hurdles on capacity expansion, enabling availability of imported inputs and liberalization from price controls. The primary intent of these reforms was to unleash the growth potential of India's industrial sector. The second bout of reform process was initiated in 1990-91 in the wake of macroeconomic crisis. Economic and institutional reforms are being fine-tuned since then, depending on the unfolding of situations both at the external and domestic fronts. It may also be worth noting that the reforms of the eighties were centered primarily on industrial and fiscal sectors, whereas, the macro- economic reforms initiated in the early nineties were more comprehensive. Stabilization and structural adjustment process constituted the core of reforms in the nineties and these were deemed to be pre-requisites for the pursuit of growth and viable balance of payment. In brief, the reforms in the nineties differed in their characteristics from those of the eighties. The reforms in the eighties have been branded as 'pro-business', whereas, the latter as 'pro-market'. It has been argued by Ahluwalia (1991) that the reforms of the eighties resulted in an upward shift in growth rate and productivity of theIndian economy and in particular that of the industrial/manufacturing sector. The comprehensive reforms of the nineties gained wide publicity as these pulled the economy from a crisis situation and succeeded in alleviating foreign exchange constraint and controlling inflation. As substantial liberalization in terms of tariff reductions and removal of quantity restrictions on imported inputs (needed for growth of manufacturing sector) took place during the nineties, it was expected that these reforms would also enable the economy to follow growth and productivity paths higher than those witnessed during the eighties. However, no such structural break in either growth or productivity is evident after the initiation of reform process of the nineties. Perhaps, the reforms of nineties targeted primarily the external and financial sectors, which have impacted the real sector indirectly.

The Emphasis

The emphasis that needs to be placed on productivity has been well articulated in the literature. A higher growth path on account of higher productivity is considered to be a preferable alternative as compared to that due to increased application of inputs. The latter is deemed to be unsustainable due to supply constraints and also due to the phenomenon of diminishing returns. However, this can be a contentious issue, if it pertains to application of labor input, especially so in the context of a labor abundant economy like India. If increased productivity is attained by downsizing employment, it may not bode well for the social fabric and it ought to be a cause of concern to the policy makers. As the basic objective underlying the argument for increasing productivity is to increase social welfare, a situation of rising productivity coupled with shrinking employment may be neither socially desirable nor politically sustainable. A higher growth path, enabled by productivity growth and combined with 'employment generation' ought to be considered as an ideal trajectory from the point of view of sustainable growth of an economy. The link between productivity and social welfare (poverty alleviation) can best operate through employment generation. The importance of productivity in poverty reduction via employment generation has been duly emphasized in the World Employment Report 2004-05 (International Labor Office, 2005), by an apt choice of theme for the report, viz., 'Employment, Productivity and Poverty Reduction'. In other words, increase in productivity needs to be conceived merely as a means to an end (i.e., social welfare) and certainly not as an end in itself.

Though the concepts of productivity, efficiency and competitiveness are indicators of performance, these need not necessarily move in tandem with each other. These terms have rather different conceptual underpinnings and hence, the policy makers need to focus on the movement of each of these in accordance with the socio-economic objectives. As regards the two concepts of productivity viz., labor productivity and total factor productivity (TFP), these are pertinent for policy makers, since the former has a direct link to standard of living and the latter indicates the economical use of resources in the process of production. 'Productivity' per se is a descriptive measure of performance and it can be estimated independently for a decision making unit.

The share of manufacturing sector in India's real GDP has risen over the years. However, this increase has not matched the expectations for two main reasons. First, the expectations from manufacturing sector were high due to the emphasis on heavy industries led development in the planning process in India; and, second, the countries with similar levels of development on the eve of planning in India, especially the East-Asian Economies including China, have been able to make their presence felt in the global market for manufacturing products to a far greater extent than India.

Productivity growth has traditionally been regarded as one of the main sources of income growth, along with capital accumulation and the deepening of human capital development. These factors and the historically established positive relationship between productivity, employment and earnings have made productivity improvement now being recognized as an important policy lever for economic development. Advocates of liberalization argue that opening up of local markets to foreign competition and foreign direct investment will help improve the productivity of domestic industry, resulting in more efficient allocation of resources and greater overall output. Productivity and efficiency are the two most important aspects to describe the relative performance of firms, producers or production units. It is necessary in this connection to recognize those factors which are exogenous to the system of production and which can account for inter-firm variations in efficiency and productivity.

Productivity growth has been one of the most popular areas of applied economic research as it is based on the well-defined analytical framework of the standard economic theory of the production function (Ravi Kiran & Manpreet Kaur, 2008). But the primary weakness of this approach of measuring performance of production units through productivity growth is that it does not allow for the distinction between changes in technology and those in the efficiency with which a known technology is applied to production. Thus technological progress and efficiency of factor use cannot be disentangled. But productivity across firms in an industry may vary due to technological differences, due to differences in the environment in which the production unit or firm operates. The traditional methodology of measuring productivity based on the standard definition of production function implicitly assumes that maximum output is attained by firms or production units for given levels of inputs. That is, output maximization is an implicit assumption. The economic development of a country depends mainly on industrial development. In manufacturing sector, the scope for internal as well as external economies is greater than in other sectors. It acts as an instrument both for creating capacity to absorb excess labor power and for diversifying the market required to boost economic development. The present study is an attempt to analyze the productivity in the manufacturing sector of India, disaggregated in to various corporate manufacturing sectors.

Methodology

Net Value Added (NVA) was taken as output, since trends are not affected significantly by the use of net value added. Also ambiguity in the calculation of depreciation can be overcome if the net value added is taken as a measure of output. Labor input consisted of workers directly involved in production the fixed capital was taken into account as capital input. Wages included remuneration paid to workers. The basic data source of the study was the Annual Survey of Industries (ASI) published by Central Statistical Organization (CSO), Government of India covering the period from 1999-00 to 2010-11. All the referred variables were normalized by applying Gross Domestic Product (GDP) deflators. The GDP at current and constant prices were obtained by referring to Economic Survey, published by Government of India, Ministry of Finance and Economic Division, Delhi.

The following statistical tools were applied to analyze the data which was applied in the studies of Laxminarayan (2003)

Partial Factor Productivity Indices

Partial factor productivity measures the ratio of output to one of the inputs setting aside interdependence of use of other output. Labor productivity (NVA/ L) is measured as a ratio of value added to total number of persons employed. Capital Productivity (NVA/K) is measured as a ratio of value added to gross fixed capital.

Total factor Productivity Indices

The study had analyzed productivity in the selected industries using a nonparametric index number approach explained below:

i. Direct Method Index: A broader gauge of productivity, total factor productivity is measured by combining the effects of all the resources used in the production of goods and services (labor, capital, raw material, energy, etc.) and dividing it into the output. Total factor productivity indices for labor and capital were calculated by applying direct method index formula as follows.

TFPDM =VPFPLX PFPK.(square root of partial factor productivity of labor (PFPL) multiplied with partial factor productivity of capital(PFPK)

ii. Kendrick Index of TFP (Total Factor Productivity) is an arithmetic measure because here tangible factor inputs are an arithmetic average of labor and capital input. As Kendrick puts it the fact that total factor input index is the weighted arithmetic mean of labor and capital input indices (rather than geometrical mean) implies a logarithmic linear relationship within successive sub periods." This measure of TFP is based on the linear production function of the form:

V= aL +bk

Where V is output L and K are labor and capital respectively, and 'a' and 'b' are coefficients of labor and capital. A weighted input index is prepared by combining labor and capital inputs using in appropriate weights. The weights may either be the prices of labor and capital or the percentage shares of labor and capital in the total value added. The weighted inputs of labor and capital in each year are added to get total input index. Then, an index of output as also of total input is prepared. The ratio of output to total input index will yield the arithmetic TFP index. Symbolically, it may be expressed as:

TFPKt = VT/ (a0 Lt +boKt).

Where V is an index of output, L and K are indices of capital and labor in year t and TFPK is the Kendrick Index for time t. However as Mehta (1980) points out that this function poses some uncomfortable theoretical problems. By re-arranging terms, equation can be written as:

VT=TFPKt (aoLt+boKt)

From this it can be seen that regardless of how fast capital is growing in relation to the labor this ratio remains same. Thus, marginal rate of substitution is assumed to remain constant regardless of the changes in factor proportions. The assumption of linear production function, prefect competition, prefect substitutability between labor and capital are implied. The weights here are not derived from a statistical function but from the base year which would be equal to one by definition.

iii. Solow index: Solow's geometric index of TFP is given by the parameter A (t) in the multiplicative production function of the form:

V=A (t) [L.sup.[alpha]] [K.sup.[beta]]

Taking logarithms and differentiating with respect to time we have

V'/V = A'/A+[alpha] L'/L +[beta]K'/K

For discrete changes the above equation may be written as:

[DELTA]A/A = [DELTA]v/v- [[alpha](AL/L) +[DELTA] K/K]

Where A/A is the rate of change of TFP; [DELTA]V/V is the rate of change of output; [DELTA]L/L and [DELTA]K/K are the rates of change of labor and capital and are the share of labor and capital in total income. Thus, rate of change of TFP is the difference between the rate of change of output and the weighted sum of the rate of change of inputs.

iv. Translog Index: The Translog index of total factor productivity is derived from Translog production function under the assumption of constant returns to scale and competitive equilibrium. It also assumes that factor price is paid according to their marginal productivity. This index is the discrete version of continuous Divisia index. Divisia index satisfies both factor reversal and time reversal tests for the index number. Its functional form is derived as follows:

Considering an aggregate production function with two factors of production which is homogeneous of degree one, we have:

Y=F (K, L, T)

Denoting factor prices by P, marginal shares of factor input can be defined as:

SL=(PK.K)/(PQ.Y)and SL=(PL.L)/PQ.L).

Under constant returns to scale:

SK + SL= 1

The rate of technical change may be defined as the rate of growth of output with respect time holding inputs constant. Symbolically:

[DELTA]ST = LnY/[delta]t

Under constant returns to scale, the rate of technical change can be expressed as the rate of growth of output less a weighted average of rate of growth of inputs (capital and labor) and weights being their respective shares. Symbolically:

[dELTA]ST = ([delta]LnY/[delta]t) -[ (SK= [delta]LnK/[delta]t) + (SL= [delta]LnL/[delta]t)]

Where S is the Divisia Index of the rate of technical progress and the figures in bracket [ ] in above equation, may be written as LnI/ t, is the Divisia Index of input. Thus, TFP is measured here as the difference between the rate of growth of value added and rate of growth of inputs (total factor input). The above equation is for the continuous time framework and to apply it for real world, a discrete time approximation is needed. The Translog index is a discrete version of continuous Divisia Index. In this average rate of technical change is defined as follows:

[DELTA]ST = [DELTA]LnY - (S L [DELTA]LnK + L [DELTA]LnL).

Here

= 1/2 [SK(t) + SK (t - 1)] = 1/2 [SL(t) + SL(t - 1)] ALnY

= LnY(t) - LnY(t-1)

[DELTA]LnK = LnK(t) - LnK(t-1) [DELTA]LnL= LnL(t) - LnL(t-1)

And [DELTA]ST is called the Translog Index of the rate of technological change.

Public Limited Companies

Productivity trends (partial and total factor productivity) in public limited companies is presented in Table 1.

The detailed time trend estimates of public limited companies revealed that labor productivity index had shown an increasing trend up to 2010-11. This accounted for more than 3 fold increase. The average annual trend rate of growth of labor productivity was 17.33 per cent for the entire period which was statistically significant at 5 percent level of significance. The index of capital productivity had shown an increasing trend but the increase had not been uniform. The index fluctuated throughout the study period. The increase in Indices of Total Factor productivity (Direct Method) was noticeable. The trend rates in the indices of Total Factor Productivity by direct method, solow and Translog methods had shown a positive growth of 8.2 percent, 2.53 percent and 1.2 percent respectively while the Kenrick Index had shown a decline of 2.1 percent. It is of interest to know how unit-labor cost has behaved. The index had declined to touch a low level of 59 units in 2010-11, the rate of decline being 6.0 per cent. This showed that even significant increase in labor productivity and total factor productivity could not reduce the unit-labor cost based on Direct Method, Solow and Translog methods during this period. The index of capital intensity had increased during the study period at the exponential trend rate of 8.41per cent with 10 percent level of statistical significance. Thus, the increase in labor productivity seems to have been made possible due to more machine per-worker effect. However, it is important to note that in a situation where capital intensity (FC/L) has been increasing overtime, the analysis for partial factor productivity changes would overstate the increase in labor productivity and understate the increase in capital productivity.

Private Limited Companies

Details of productivity trends in private limited company is presented in Table 2

The indices of partial factor productivity of labor in private limited company had increased more than three-fold, while capital productivity had increased only by 16 units during the study period. The annual trend rate of growth in labor productivity was 12.01 per cent, while in capital productivity it was 2.8 per cent during the entire period. All the indices of total factor productivity except, Kendrick method had shown increasing trend. In absolute terms there was an increase of 79 units 92 and 269 units respectively in Direct, Solow and Translog methods. In terms of annual trend rate, the Total Factor Productivity had declined at the rate of 1.6 per cent in Kendrick Method. Taking in to consideration the entire period of study, the unit-labor cost had declined by 0.06 per cent. The decline in unit-labor cost along with increase in labor productivity indicated that wage increase had been less than the increase in labor productivity.

Public Corporations

Trends in productivity trends of Public Corporations is presented in Table 3.

The partial factor productivity indices of Public Corporations showed an unexpected and appreciable increase in labor productivity and slight increase in capital productivity during the period of study. All the measures of total factor productivity except Kendrick method had also shown a upward trend. Positive trend rates were observed in partial factor productivity indices of labor and capital to the extent of 19.3 percent and 6.60 percent respectively. Among the total factor productivity indices except Translog indices all the other indices had shown negative trend rates. The analysis revealed an inverse relationship between labor productivity and unit-labor. Capital intensity had shown fluctuations throughout the period by registering an increase of 9 per cent per annum which was statistically significant at 5 percent.

Government Enterprises

The trends in productivity indices of government enterprises is presented in Table 4

The analysis of partial factor productivity indices of labor in government department enterprises showed that though labor productivity indices had increased to 251 at the end of the period, there had been wide fluctuations throughout the period of analysis. The annual trend rates revealed that labor productivity increased by 5.52 per cent during the study period. The indices of capital productivity had fluctuated throughout the period and had witnessed a trend rate of 3.63 percent which was statistically not significant. The total factor Propuctivity indices of all the methods showed a declining trend, the annual trend rates of Total Factor productivity indices had shown positive trend rate of 5.80 percent, only in Solow method. But this was statistically proved as not significant. The unit-labor cost had also shown fluctuating trend and there existed an inverse relationship between labor productivity and unit-labor cost. For the entire period, the unit-labor cost had grown at an average exponential rate of 8.44 percent. The capital intensity figures during the entire period recorded a negative trend rate. The above analysis indicated that in this sector increasing labor productivity was accompanied by small increase in capital productivity and rising capital intensity, implying the presence of idle capacities and inefficiency in the use of resources especially capital.

Corporate Sector

Productivity trends in aggregate corporate sector is shown in Table 5

The indices of partial factor productivity of aggregate corporate sector revealed that from the beginning to the end of the period labor productivity had increased more than two-fold, whereas capital productivity had increased to the extent of 24 units. With regard to the annual trend rates, labor productivity had shown an increase of 10.80 per cent per annum at 5 percent level of significance during the study period, while the capital productivity had shown an increase to the extent of 3.72 per cent per annum at 10 percent level of significance. Excepting Kendrick index, all the other total factor productivity indices had increased. The Kendrick index had shown a decline of 81 units during the period. Unit-labor cost figures had shown an inverse relation with labor productivity.

Conclusion

An economy could become an industrialized one if it gets its own efforts (i.e.) learning by doing, setting up different industries based on the local resources, development of social overhead and economic overhead capital like transport, health and education. The industries might be agro-based, forest based or mines based. Development of higher infrastructural facilities in the form of power, roads and tele- communication facilities has to be a top priority for the policy makers to raise the productivity and efficiency of the factors used in the near future.

References

Laxminarayan, (2003), Productivity and Wages in Indian Industries, Discovery Publishing House, New Delhi.

Ahluwalia I.J(1991),Productivity and Growth in Indian Manufacturing, Oxford university Press, New Delhi

Pushpa Trivedi, L. Lakshmanan, Rajeev Jain &Yogesh K Gupta(2011), "Productivity, Efficiency and Competitiveness of the Indian Manufacturing Sector", Development Research Group Series (DRGS), Department of Economic Analysis and Policy, Reserve Bank of India, Mumbai.

Ravi Kiran, Manpreet Kaur (2008), "Global Competitiveness and Total Factor Productivity in Indian Manufacturing", International Journal of Indian Culture and Business Management, 1(4); 1-15

World Employment Report (2004-05), Employment, Productivity and Poverty Reduction, ILO http://www. ilo.org/public/libdoc/ilo/P/ 2004/09465(2004-2005)272.pdf

M. Manonmani is Professor in Economics, Avinashilingam Institute for Home Science and Higher Education for Women, Coimbatore-641043, E-mail: manonmayil@yahoo.com

Table 1 Productivity Trends in Public Limited Companies
(1999-2000=100)

Year Indices of Partial
 Factor Productivity

 Labor Capital Direct
 Method

1999-2000 100 100 100
2000-2001 97 95 95
2001-2002 100 84 92
2002-2003 123 96 109
2003-2004 147 110 127
2004-2005 177 132 153
2005-2006 193 122 153
2006-2007 220 136 173
2007-2008 250 56 190
2008-2009 241 117 168
2009-2010 228 88 141
2010-2011 318 116 192

Annual Trend Rates

[beta]-value 17.33 * 3.27 8.2 **
[R.sup.2] 0.924 0.002 0.89
t-value 10.452 0.14 8.852

Year Indices of Total
 Factor Productivity

 Kendrick Solow Translog

1999-2000 100 100 100
2000-2001 99 56 97
2001-2002 120 56 102
2002-2003 100 74 101
2003-2004 90 100 98
2004-2005 84 133 97
2005-2006 80 219 100
2006-2007 79 567 91
2007-2008 79 432 103
2008-2009 87 563 109
2009-2010 101 463 123
2010-2011 90 416 136

Annual Trend Rates

[beta]-value -2.1 2.53 ** 1.2
[R.sup.2] 0.268 0.758 0.29
t-value -1.815 5.308 1.917

Year Unit Capital
 Labor Intensity
 Cost (w/v) (Fc/L)

1999-2000 100 100
2000-2001 101 102
2001-2002 109 118
2002-2003 91 127
2003-2004 78 133
2004-2005 67 134
2005-2006 63 157
2006-2007 58 161
2007-2008 55 172
2008-2009 63 205
2009-2010 74 254
2010-2011 59 273

Annual Trend Rates

[beta]-value -6.0 ** 8.41 **
[R.sup.2] 0.685 0.877
t-value -4.422 8.001

Source: Calculations are based on ASI data

* Significant at 5% level

** Significant at 10% level

Table 2 Productivity Trends in Private Limited Companies
(1999-2000=100)

Year Indices of Partial
 Factor Productivity

 Labor Capital Direct
 Method

1999-2000 100 100 100
2000-2001 100 94 96
2001-2002 104 82 93
2002-2003 100 100 100
2003-2004 126 100 114
2004-2005 140 106 121
2005-2006 206 135 168
2006-2007 187 129 157
2007-2008 217 124 164
2008-2009 266 135 193
2009-2010 285 124 189
2010-2011 319 116 179

Annual Trend Rates

B-value 12.01 * 2.8 ** 6.5 **
[R.sup.2] 0.921 0.389 0.756
t-value 10.774 2.526 5.569

Year Indices of Total
 Factor Productivity

 Kendrick Solow Translog

1999-2000 100 100 100
2000-2001 226 21 108
2001-2002 68 46 118
2002-2003 189 26 135
2003-2004 89 53 126
2004-2005 49 29 148
2005-2006 26 121 182
2006-2007 33 21 196
2007-2008 31 65 215
2008-2009 28 53 246
2009-2010 31 61 283
2010-2011 44 192 369

Annual Trend Rates

B-value -1.6 ** -0.16 11.2 **
[R.sup.2] 0.475 0.013 0.881
t-value -3.009 -0.36 8.609

Year Unit Capital
 Labor Intensity
 Cost (w/v) (Fc/L)

1999-2000 100 100
2000-2001 102 106
2001-2002 104 124
2002-2003 11 101
2003-2004 88 126
2004-2005 85 133
2005-2006 67 156
2006-2007 74 148
2007-2008 71 175
2008-2009 66 20
2009-2010 68 238
2010-2011 74 329

Annual Trend Rates

B-value -0.006 0.038
[R.sup.2] 0.099 0.315
t-value -1.047 2.145

Source: calculations are based on ASI data

* Significant at 1% level

** Significant at 5% level

Table 3 Productivity Trends in Public Corporations (1999-2000=100)

Year Indices of Partial
 Factor Productivity

 Labor Capital Direct
 Method

1999-2000 100 100 100
2000-2001 96 92 94
2001-2002 101 89 95
2002-2003 191 161 175
2003-2004 291 204 244
2004-2005 468 306 378
2005-2006 572 332 436
2006-2007 543 103 236
2007-2008 681 111 275
2008-2009 128 396 225
2009-2010 928 234 465
2010-2011 938 142 365

Annual Trend Rates

[beta]-value 19.3 ** 6.60 12.9 **
[R.sup.2] 0.65 0.161 0.552
t-value 4.307 1.383 3.509

Year Indices of Total
 Factor Productivity

 Kendrick Solow Translog

1999-2000 100 100 100
2000-2001 235 235 900
2001-2002 246 595 848
2002-2003 88 119 1028
2003-2004 69 638 1018
2004-2005 54 35 1025
2005-2006 39 80 976
2006-2007 38 85 223
2007-2008 24 29 216
2008-2009 34 263 1011
2009-2010 31 53 1141
2010-2011 43 131 1005

Annual Trend Rates

[beta]-value -17.5 -9.93 5.75
[R.sup.2] 0.513 0.118 0.051
t-value -3.249 -1.155 0.736

Year Unit Capital
 Labor Intensity
 cost (w/v) (Fc/L)

1999-2000 100 100
2000-2001 100 100
2001-2002 100 100
2002-2003 100 100
2003-2004 85 133
2004-2005 85 133
2005-2006 62 133
2006-2007 69 133
2007-2008 69 167
2008-2009 62 167
2009-2010 69 233
2010-2011 69 300

Annual Trend Rates

[beta]-value -4.74 ** 9.00 **
[R.sup.2] 0.779 0.75
t-value -5.944 5.481

Source: Calculations are based on ASI data.

** Significant at 5% level

Table 4 Productivity Trends in Government Enterprises
(1999-2000=100)

Year Indices of Partial
 Factor Productivity

 Labor Capital Direct
 Method

1999-2000 100 100 100
2000-2001 84 52 66
2001-2002 56 55 109
2002-2003 87 166 120
2003-2004 129 138 134
2004-2005 79 41 58
2005-2006 95 55 72
2006-2007 53 52 30
2007-2008 188 614 341
2008-2009 304 97 172
2009-2010 256 69 133
2010-2011 251 102 16

Annual Trend Rates

[beta]-value 5.52 ** 3.63 -3.40
[R.sup.2] 0.214 0.038 0.019
t-value 1.651 0.63 0.438

Year Indices of Total
 Factor Productivity

 Kendrick Solow Translog

1999-2000 100 100 100
2000-2001 374 44 73
2001-2002 275 311 54
2002-2003 173 199 49
2003-2004 74 142 34
2004-2005 171 130 34
2005-2006 711 159 33
2006-2007 218 652 89
2007-2008 183 405 35
2008-2009 30 294 87
2009-2010 28 182 22
2010-2011 69 68 64

Annual Trend Rates

[beta]-value -13.3 5.80 -3.93
[R.sup.2] 0.075 0.061 0.066
t-value -0.901 0.087 -0.838

Year Unit of Capital
 Labor Intensity
 Cost (w/v) (Fc/L)

1999-2000 100 100
2000-2001 100 100
2001-2002 135 161
2002-2003 157 27
2003-2004 117 51
2004-2005 83 92
2005-2006 14 200
2006-2007 124 173
2007-2008 26 31
2008-2009 85 31
2009-2010 56 37
2010-2011 63 24

Annual Trend Rates

[beta]-value 8.44 ** -10.90
[R.sup.2] 0.295 0.133
t-value 2.047 -1.237

Source: Calculations are based on ASI data

** Significant at 5 level

Table 5 Productivity Trends in Aggregate Corporate Sector
(1999-2000=100)

Year Indices of Partial
 Factor Productivity

 Labor Capital Direct
 Method

1999-2000 100 100 100
2000-2001 101 94 312
2001-2002 99 88 95
2002-2003 115 106 112
2003-2004 145 118 133
2004-2005 171 141 49
2005-2006 187 147 167
2006-2007 194 147 170
2007-2008 223 147 184
2008-2009 247 141 188
2009-2010 262 124 181
2010-2011 288 124 191

Annual Trend Rates

[beta]-value 10.80 * 3.72 ** 4.02
[R.sup.2] 0.973 0.479 0.04
t-value 18.969 3.029 0.647

Year Indices of Total
 Factor Productivity

 Kendrick Solow Translog

1999-2000 100 100 100
2000-2001 104 95 120
2001-2002 153 19 122
2002-2003 265 38 114
2003-2004 72 134 106
2004-2005 44 95 81
2005-2006 30 201 77
2006-2007 28 143 33
2007-2008 26 278 38
2008-2009 27 182 41
2009-2010 27 326 63
2010-2011 29 409 151

Annual Trend Rates

[beta]-value -18.4 18.66 ** -6.31
[R.sup.2] 0.412 0.724 0.139
t-value -2.648 5.128 -1.272

Year Unit Capital
 Labor Intensity
 Cost (w/v) (Fc/L)

1999-2000 100 100
2000-2001 104 117
2001-2002 108 117
2002-2003 92 117
2003-2004 78 133
2004-2005 66 133
2005-2006 63 133
2006-2007 60 150
2007-2008 57 167
2008-2009 59 183
2009-2010 62 233
2010-2011 64 250

Annual Trend Rates

[beta]-value -7.65 ** 8.42 **
[R.sup.2] 0.765 0.842
t-value -5.705 7.303

Source: Calculations are based on ASI data

Foot note: Significant at 5% level