Nexus between Total Factor Productivity Growth of Manufacturing Sector, Growth Rate of Output and Exchange Rate: Does Exchange Rate Play a Significant Role?

Using Indian organised manufacturing data to investigate whether exchange rate depreciation resulted in an acceleration in productivity growthand output growth of the manufacturing sector. This paper presents a set of estimates of TFP growth in Indian manufacturing in the last three and half decades, which have largely been made following the methodology of input and output measurement by Tourniquet Productivity index. The paper run Granger causality test among three variables, namely, total factor productivity, growth rate of output and real effective exchange rate. This paper documents the evidence of exchange rate play a significant role to increase the industrial total factor productivity as well as industrial production.