Efficiency estimation for indian textile industry

Productivity of an industry largely depends on the technical and allocative efficiency of its inputs. Technical Efficiency includes an optimum use of available resources and technology, whereas, Allocative Efficiency deals with how efficiently the available resources are allocated to various alternative uses. Estimation of Technical Efficiency is the main motivation behind the estimation of a Production Frontier. The points below the estimated production frontier are the indicators of Technical Inefficiency.

The present study aims at estimating Stochastic Production Frontiers to analyze the Technical Efficiency of Indian Textile Industry. The study includes Productivity Measurement for Indian Textile Industry using various Productivity and Performance ratios. The Cobb-Douglas Production Function is used for this purpose since it has been found to be the most appropriate form for Indian Industries from several research studies. Productive Capacity Realization Ratios have been obtained using the Frontier Estimates and thereby the efficiency levels in the Indian Textile Industry are evaluated. The paper ends with identifying some reasons for the prevailing inefficiency in the industry and some measures to reduce these inefficiencies have been suggested.