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

Abstract

In the contemporary discourse on climate change negotiations, the role of energy use patterns, efficiency, and productivity has gained paramount importance, particularly in the context of Indian manufacturing industries. Recognizing the critical interplay between these elements, the primary objective of this paper is to estimate the transcendental logarithmic production function. Moreover, the study aims to rigorously analyze the intricate relationship between energy intensity and total factor productivity within the Indian manufacturing sector. This research endeavors to shed light on the nuanced dynamics that underpin the efficiency of energy use and its consequential impact on the overall productivity of the manufacturing industries in India. The estimation of total factor productivity in this study relies on a comprehensive four-input model, encompassing labor, capital, material, and energy. The outcomes of the analysis indicate that labor and material inputs exert a significant influence, surpassing the impact of capital and energy inputs. This suggests that, within the context of the studied manufacturing industries, the efficiency and utilization of labor and material resources play pivotal roles in shaping overall productivity. Recognizing the relative importance of these inputs can inform targeted strategies for enhancing productivity and resource utilization in the pursuit of sustainable and efficient industrial practices. Additionally, the estimates from the study reveal several key relationships with total factor productivity in Indian manufacturing industries. The age of the firm, export intensity, and disembodied technology import demonstrate a positive association with total factor productivity. This implies that older firms, those with a higher proportion of exports, and those incorporating technology that doesn't require physical presence in the production process tend to exhibit higher productivity levels. Conversely, ownership, energy intensity, embodied technology import, and R&D intensity exhibit negative associations with total factor productivity. This suggests that firms with certain ownership structures, higher energy consumption, reliance on technology with physical presence, and those with lower investment in research and development may experience lower levels of overall productivity in the Indian manufacturing sector. These insights contribute to a nuanced understanding of the multifaceted factors influencing productivity within this industrial context. İn addition, energy efficient firms also found to have high levels of total factor productivity. This implies the need for fostering energy efficiency at firm level in Indian Manufacturing.