Productivity, Energy Intensity and Output: A Unit Level Analysis of the Indian Manufacturing Sector

This study examines the Total Factor Productivity (TFP) growth of the preexisting units on a balanced sample for ten years (1998-1999 to 2007- 2008) following the Levinsohn and Petrin (2003) technique. This study uses data from the Annual Survey of Industries at factory level. The results of the study indicate that most of the industries achieved positive TFP growth except a few; and thus within plant efficiency exists in Indian manufacturing sector. A further analysis of determinants of energy intensity using panel data model shows that productive plants in terms of TFP, are energy efficient. It is also observed that medium low-tech and high-tech industries on the basis of OECD classifications are energy efficient compared to the low-tech and the medium high-tech industries. The study also validates the “productivity dilemma hypothesis” for the sample firms indicating TFP and plant output are the major determinants of energy intensity.