Examining Total Factor Productivity and Energy Intensity in the Landscape of Indian Manufacturing

Abstract

This study examines the relationship between energy intensity and total factor productivity in Indian manufacturing industries using the transcendental logarithmic production function. The analysis employs a four-input model including labor, capital, material, and energy. Findings reveal that labor and material inputs exert a stronger influence on productivity compared to capital and energy, highlighting their critical role in enhancing industrial efficiency. The results emphasize the importance of optimizing labor and material utilization for improving overall productivity. The study also identifies key factors affecting total factor productivity. Older firms, higher export intensity, and disembodied technology imports positively influence productivity, suggesting that experience, global market integration, and non-physical technology adoption enhance efficiency. Conversely, ownership structure, energy intensity, embodied technology imports, and low R&D investment negatively impact productivity, indicating that firms relying on high energy consumption and imported physical technology face productivity challenges. Additionally, energy-efficient firms demonstrate higher total factor productivity, underscoring the importance of promoting energy efficiency at the firm level. These insights provide valuable implications for policymakers and industry stakeholders. Encouraging investment in labor and material efficiency, fostering energy conservation, and promoting technology adoption can enhance productivity in Indian manufacturing. Policymakers should focus on incentivizing R&D, supporting technology upgrades, and implementing energy efficiency programs to drive sustainable industrial growth. The findings highlight the need for strategic interventions to improve energy use patterns and optimize resource allocation for achieving long-term competitiveness and environmental sustainability in the Indian manufacturing sector.