Are exporting firms more productive in
the Indian textile industry?
Dhwani Gambhir and Seema Sharma
Dhwani Gambhir is
Research Scholar at the
Department of
Management Studies,
Indian Institute of
Technology Delhi,
New Delhi, India.
Seema Sharma is
Associate Professor at
the Department of
Management Studies,
Indian Institute of
Technology Delhi,
New Delhi, India.
The authors appreciate the
valuable suggestions of the
editor and the anonymous
referees which have enhanced
the quality of this paper over
the initial version.
Received 3 July 2014
Revised 28 November 2014
29 May 2015
Accepted 4 August 2015
PAGE 72 MEASURING BUSINESS EXCELLENCE
Summary
Purpose – This paper aims to study whether exporting enterprises are more productive in
export-intensive industries. It also aims to identify the action area and policy direction for enhancing
productivity in Indian textile manufacturing. Global integration has increased the volume of international
trade. It is crucial for countries to have competitive enterprises to capture a larger share of the global
economy. Improvement in productivity performance not only enhances competitiveness but also
promotes growth in an economy.
Design/methodology/approach – A productivity analysis for the Indian textile manufacturing industry
using firm-level panel data is conducted. The data are collected for 160 firms relevant to the period from
2007-2008 to 2012-2013 from Ace Equity database. Using the technique of data envelopment analysis,
the output oriented Malmquist productivity index is computed and the sources of productivity change
are identified. Also, a comparison between the productivity performance of the exporting and
non-exporting firms has been made.
Findings – The results suggest that exporting firms are exhibiting better productivity performance and
resource utilisation during the study period. Technology change and scale efficiency seem to be the
major sources of productivity gain for exporting firms.
Research limitations/implications – The research is limited to a single industry, reference database
and methodology. There is scope for further in-depth, micro-level research to analyze the differences in
drivers of productivity for exporting and non-exporting firms.
Originality/value – This paper provides validation to export promotional policies in the Indian textile
industry by establishing better productivity performance of exporting firms. It also provides direction for
managerial action by identifying efficiency component as the factor pulling down productivity.
Keywords Textile industry, Data envelopment analysis, Exporting, Malmquist productivity index,
Total factor productivity
Paper type Research paper
1. Introduction
Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to
improve its standard of living over time depends almost entirely on its ability to raise its output
per worker (Krugman, 1994).
It is beneficial for an economy to shift labour and other resources to economic activities
which are more productive (McMillan and Rodrik, 2011). When it comes to international
trade, competitive advantage for countries depends greatly on differences in productivity
and its growth rate in domestic industries. It is widely acknowledged in literature that
economic growth in the long run can only be sustained with continuous productivity growth
(Joshi and Singh, 2010; Sharma and Mishra, 2011). Productivity measures can be used to
compare performance between firms and over time. An improvement or gain in productivity
leads to higher output from existing level of inputs or the same level of output from lower
amount of inputs. Productivity and its growth is a relevant topic for the Indian economy at
its current stage. Inability to provide sustainable employment to the growing work force may
turn the expected demographic “dividend” into a “nightmare or disaster”. The levels of
VOL. 19 NO. 4 2015, pp. 72-84, © Emerald Group Publishing Limited, ISSN 1368-3047 DOI 10.1108/MBE-07-2014-0021
labour productivity continue to remain low in many sectors, although post-2000 productivity
in manufacturing improved (Reddy, 2005).
The manufacturing sector is a major driver for exports in developing economies. In the case
of India, however, it has been performing poorly and opportunities provided by
globalisation have not been tapped properly (Bansal, 2002). With an aging labour force
and shift of labour into more knowledge-intensive activities in China, opportunities have
emerged for other labour-intensive countries to increase their participation in the global
economy (McKinsey Global Institute, 2012). India should make use of its comparative
advantage of lower wages and increase transition of agricultural labour into manufacturing.
But, on the other hand, Indian manufacturing is adversely affected by factors such as
inadequate infrastructure, low skill development, low R& D, excessive regulation in land
and labour markets (Singh, 2013). A National Manufacturing Policy (NMP) was introduced
by the government of India in 2011 to address the matters relevant to this sector. It
recognises the multiplier effect of manufacturing growth on employment generation in
manufacturing and other sectors of agriculture and services as well. The policy stresses on
rationalisation and simplification of business regulations, promotes reforms in land and
labour markets and a smooth and efficient exit mechanism to ensure optimum utilisation of
scarce resources. The reforms are aimed, in particular, to promote self-regulation. The
policy document provides in detail the overview of all reforms to be introduced for the
Indian manufacturing sector. NMP (2011) has also identified certain employment-intensive
industries with great export potential which are to be given special attention by the policy
makers such as – textiles and garments, leather and footwear, gems and jewellery and food
processing.
In fact, the textile industry is also one of the leading sectors for the Indian economy and has
a large number of large and small manufacturing firms. India is one of the top ten textile
trading nations in the world, with textile sector contributing 4 per cent of the gross domestic
product (GDP) and 16 per cent of total exports in India (Kannan, 2010). Textile
manufacturing is one of the leading industries in the small-scale or micro, small and
medium enterprises (MSME) sector in India and has a great potential for growth in output,
exports and employment (MSME, 2013). However, to improve global competitiveness, the
textile industry was removed from the list of sectors reserved exclusively for the MSME
sector in 2001 (Joshi and Singh, 2010).
In addition, on 1 January 2005, the World Trade Organization’s (WTO) agreement on textile
and clothing (ATC) expired. Textile trade is no longer restricted by non-tariff barriers and is
covered under the general multilateral regulations of WTO. Hence, the sector is completely
open and without restrictions (WTO, 2014). This development is of immense value for the
exporting enterprises and an opportunity for India to increase textile exports. India seems
to have tapped this opportunity to some extent and has recently become the world’s
second largest textile exporter. However, the exports are just one-seventh of China, the
world leader in textile exports and India has a narrow lead from its major competitors (The
Times of India, 2014) (Figure 1).
Despite lower demand and labour crunch, production and capacity utilisation has
improved recently in the textile industry and the outlook for export is positive. Currently, the
industry faces many constraints in the form of costly raw materials, poor power supply,
fluctuations in exchange rate and costly credit (FICCI, 2014). The cost of power to the
textile industry in India is almost twice the global standard rates and results in a cost
disadvantage (Kannan, 2010). By improving productivity in textile manufacturing, India will
be able to not only tap the growing domestic market but also expand its share in the global
market.
Because the textile industry is export-intensive, a productivity comparison for exporting
vis-à-vis non-exporting textile firms is relevant. This paper aims to measure productivity
growth and analyze the contribution of various components to such growth in order to

VOL. 19 NO. 4 2015 MEASURING BUSINESS EXCELLENCE PAGE 73

 Figure 1 Textile exports ($bn) of the major textile exporters of the world: 2013

773

274

40 36 35 28

China India Italy Germany Bangladesh World

Source: Based on data from The Times of India (2014)

compare performance of both exporting and non-exporting firms. Such comparison will
shed light on the direction of future research and policy initiatives.
The paper is organised as follows. Section 2 provides a review of literature and the specific
research objectives; Section 3 covers the methodology and data used. The analysis and
findings are then presented in Section 4, and Section 5 concludes the paper.

2. Review of literature
The textile industry and manufacturing productivity have been widely studied by
researchers across the globe. There are a number of studies that cover productivity in
Indian manufacturing and textile industry in particular.
Researchers have used different methodologies to study trends in manufacturing
productivity. However, data envelopment analysis (DEA)-based Malmquist productivity
index (MPI) is the most popular technique for estimating productivity growth. Most studies
compare the productivity trends between the years before and after the economic reforms
adopted in 1991 (Unel, 2003; Kumar, 2006; Rath and Madheswaran, 2008; Kumar and
Basu, 2008; Sehgal and Sharma, 2011; Pradeep and Chen, 2012; Babu and Natarajan,
2013). The detailed review of the economic reforms is beyond the scope of this paper. Unel
(2003) concluded, in his study, that the structural composition of manufacturing in India has
not changed despite higher growth in labour productivity and total factor productivity (TFP)
in the period after the economic reforms. The study by Kumar (2006) revealed that capital
intensity has increased in more recent years and in the post reforms period, technology
change has been the driver for efficiency growth. Rath and Madheswaran (2008) analysed
the relationship between labour productivity, real wages, employment and prices using
conventional co-integration and error correction models. They found that labour
productivity in the manufacturing sector has shown an overall upward trend from
1960-1961 to 2001-2002 and that an increase in labour productivity leads to demand for
higher wages invariably. Kumar and Basu (2008) measured productivity in the Indian food
processing industry for the period from 1988-1989 to 2004-2005 using DEA. They found
that scale efficiency change was the main source for productivity growth in the food
industry. Sehgal and Sharma (2011) found that post the reforms, efficiency deterioration
has become a major concern for organized sector manufacturing industries in the state of
Haryana. Contrary to this, Pradeep and Chen (2012) found higher technical efficiency in the
post reform period for small manufacturing firms in Coimbatore, in the state of Tamil Nadu.
Some researchers have studied the various drivers of productivity in manufacturing. Singh
(2012) studied the impact of Mahatma Gandhi National Rural Employment Guarantee
Scheme (MGNREGS) on rural wages, migration and occupational shift. He found that
MGNREGS has led to higher wages in rural areas; in most cases, wages under MGNREGS
are better or at par with wages in other activities. Due to reduced supply of migrant workers

PAGE 74 MEASURING BUSINESS EXCELLENCE VOL. 19 NO. 4 2015

from rural areas, manufacturing companies are facing a labour crunch and higher costs.
Singh (2013) found that government procedures affect manufacturing productivity and
transparency in procedures is important for speedy implementation of policies in the
sector. He also discussed the recent initiatives to promote manufacturing and suggested
some policy interventions. Babu and Natarajan (2013) analyzed the trends in labour and
total factor productivity growth for the organized manufacturing sector for the period from
1980-1981 to 2007-2008. They concluded that the considerable variance in productivity
growth across states can be attributed to regional differences in infrastructure. Mitra et al.
(2012) also revealed that infrastructure variables mainly transport, energy and information
and communication technology (ICT) are significant determinants of manufacturing
performance. They also found that Indian firms buy foreign technology to improve
productivity levels as they have low research and innovation orientation. Ravi (2009)
studied the impact of specific government policy interventions on the growth of
entrepreneurship in the MSME sector in India. Panel regression was applied for data from
1991 to 2002 for all Indian states and union territories. The analysis revealed that specific
policies have negligible impact, whereas more general policies related infrastructure and
finance which aim at overall development of the business environment have positive impact
on MSME sector growth across performance measures and states in India. She proposed
that the government should be a facilitator instead of being an active player.
Certain studies relate specifically to the productivity in Indian textile industry. Some have
used stochastic frontier analysis (Bhandari and Maiti, 2007) while others have applied DEA
(Solankar and Singh, 1999; Bhandari and Ray, 2007; Joshi and Singh, 2008, 2009) for
estimating efficiency and productivity performance. The study by Sharma et al. (2010b)
using growth accounting approach revealed a negative trend in total factor productivity
growth and partial productivity for capital in the post liberalisation period for the Indian
textile industry. However, gains were reported by the study for partial productivity in terms
of raw material, labour and energy. Joshi and Singh (2010) found that the Indian garment
industry had registered average annual TFP growth rate of 1.7 per cent during 2002 to
2007, driven mainly by progress on technical efficiency.
Post the economic reforms, Indian trade policies have promoted export-led growth
vigorously. Sharma and Mishra (2011) surveyed literature to find that conflicting views exist
regarding the relationship between productivity and exporting. Some studies report that
export in particular and international trade in general help promote productivity and growth.
Hsu and Chen (2000) found that larger trade intensity and exports improve labour
productivity of small and medium enterprises. Exporting has a positive impact on growth of
new enterprises and women enterprises (Coad and Tamvada, 2012). Other studies have
supported the hypothesis of self-selection, i.e. firms with higher productivity are the ones to
enter the export market. Sharma and Mishra (2011) conducted a firm-level study on the
linkage between export market participation and total factor productivity growth and the
productivity differences between exporting and non-exporting firms. However, they could
not provide any evidence to support the claim that a firm’s participation in export improves
its productivity. Their paper concluded that the linkage flows from productivity to exporting
and not in the opposite direction. A point to consider is that the export participation in Indian
firms is generally at a low level, which may not be adequate to influence their productivity
performance. Deshmukh and Pyne (2013) also studied the firm-level productivity and
self-selection hypothesis. They reviewed the existing literature which revealed that export
orientation is significantly determined by productivity. Their empirical analysis provided
evidence in favour of the self-selection hypothesis. The study also revealed that
export-intensity is more for domestic and private firms as compared to foreign and public
firms. At the firm level, as the determinants of labour productivity for India’s major exporting
manufacturing industries, firm size and raw material intensity are significant, while the
ownership status is insignificant. They also found negative correlation between firm size
and labour productivity in manufacturing industries. Sharma and Sharma (2010) computed
technical efficiency and found that cluster approach is beneficial in the small-scale sector

VOL. 19 NO. 4 2015 MEASURING BUSINESS EXCELLENCE PAGE 75

 in India. There are some studies confirming that small-scale manufacturing sector has
experienced growth in terms of number of units, production, employment, exports and
contribution to GDP following policy reforms in India (Garg and Walia, 2012; Singh et al.,
2012). Maiti (2013) studies how market imperfections influence the impact of trade reform
on productivity growth. After adjusting for market distortions, the productivity growth in the
post-reform period is found to be lower than the usual estimate calculated under Solow’s
method. He concludes that trade reforms improve the productivity in the economy if
distortions arising due to market imperfections are controlled.
There do not seem to be many studies specifically comparing the productivity of exporting
firms with non-exporting firms for the Indian textile manufacturing industry. India currently
has an export promotional outlook in public policy. Such a comparison would help in
establishing whether such outlook is justified or not. This paper aims to add to literature by
analyzing productivity based on exporting nature of textile manufacturing firms in India
using data envelopment analysis. The specific objectives for the study as listed below are:
 To compare productivity of exporting and non-exporting textile manufacturing firms.
 To identify sources of productivity growth for exporting and non-exporting firms in textile
manufacturing.
 To suggest the appropriate action area and policy measures for enhancing productivity
on the basis of empirical results.

3. Methodology and data

3.1 Methodology
Production process includes various factors and resources. To measure the productivity
performance of a firm, the TFP index is considered most appropriate. It is basically output
divided by a bundle of inputs. Productivity growth refers to an increase in the TFP index
over time due to increase in output on account of factors other than increase in the volume
of inputs used.
MPI is an index of TFP developed by Caves et al. (1982) and is popularly used by
researchers. It makes use of Malmquist output distance functions that use technology of a
particular time period as the reference for a set of decision making units (DMUs). This
facilitates the inclusion of multiple output and input variables in the production model. The
MPI applies the non-parametric estimation technique of DEA to identify efficient performers
among a group of DMUs. Charnes et al. (1978) introduced the term DEA by enhancing
Farrell’s (1957) concept. DEA uses linear programming to identify a production or efficient
frontier enveloping all relevant DMUs. DMUs lying on the frontier are considered to be
efficient and those lying below it are considered inefficient.
The empirical calculation of MPI using DEA was first made by Fare et al. (1994). They
identified two different sources for the total factor productivity as efficient resource
utilisation and technology change. To remove confusion from the choice of reference
technology, MPI was taken as the geometric mean of indices for two-consecutive periods.
Under constant returns to scale (CRS), MPI expresses TFP change (TFPCH) as the product
of technology change (TECHCH) and efficiency change (EFFCH): TFPCH ⫽ TECHCH ⫻
EFFCH. Under variable returns to scale (VRS), the EFFCH can further be decomposed as
the product of pure efficiency change (PECH) and scale efficiency change (SECH):
EFFCH ⫽ PECH ⫻ SECH. This adds to the appeal of MPI because policy initiatives can be
developed as per the performance of different component sources (Mahadevan, 2002).
The interpretation of MPI and component indices is simple – a value equal to 1 represents
stagnation, less than 1 represents deterioration, while more than 1 represents an
improvement in productivity or efficiency growth (Coelli, 1996). The average indices may
also be converted into percentage terms to facilitate result based comparison. For
example, total productivity change in terms of percentage change per annum can be

PAGE 76 MEASURING BUSINESS EXCELLENCE VOL. 19 NO. 4 2015

derived as: (TFPCH ⫺ 1) ⫻ 100. DEA has other distinct advantages over the competing
approaches to TFP estimation such as growth accounting approach and stochastic frontier
analysis (Grifell-Tatje and Lovell, 1995; Kumar, 2006; Joshi and Singh, 2010; Sehgal and
Sharma, 2011), as follows:
 It does not need the production function to be specified in any functional form.
 It does not assume complete technical efficiency. In other words, it facilitates
decomposition of TFP into components – technical change and efficiency. Efficiency
component can further consist of pure efficiency and scale components.
 It does not require any data on prices.
 It does not require a specific objective function such as cost minimisation or revenue
maximisation.
 It refers to the best practice technology rather than average technology for making
comparison between units.
 It does not assume perfect competition or constant returns to scale.
The more recent Olley–Pakes and Levinsohn–Petrin semi-parametric methods have also
been used for the TFP estimation in some studies (Sharma and Mishra, 2011; Maiti, 2013).
DEA has been used widely for performance measurement in different spheres of activity –
such as agriculture (Chaudhary, 2012), manufacturing (Kumar and Basu, 2008; Joshi and
Singh, 2010; Pradeep and Chen, 2012) and service (Sharma et al., 2010a). The review of
literature supports the choice of DEA as a methodology. DEA is applied in this paper for a
research purpose that has not been explored much in existing studies. The output-oriented
MPI and its different components, under CRS and VRS, have been estimated using DEAP
Version 2.1, a program for DEA developed by Coelli (1996) in this paper. Output orientation
aims for maximum expansion in output with a given inputs mix. The mathematical notations
used for the linear programming problems under different models have been provided in
the program guide by Coelli (1996).

3.2 Data description

Most of the productivity studies in India are conducted at the macro i.e. state or industry
level using aggregates provided by the Annual Survey of Industries (Unel, 2003; Kumar,
2006; Rath and Madheswaran, 2008; Sehgal and Sharma, 2011; Babu and Natarajan,
2013; Maiti, 2013). However, recent years have seen micro-level analysis by researchers.
Researchers undertaking micro- or firm-level analysis generally take the sample firms from
a single industry or from few industries (Kumar and Basu, 2008; Joshi and Singh, 2010;
Sharma and Mishra, 2011; Mitra et al., 2012). Based on the theoretical background
provided by literature, the sample for this paper is restricted to manufacturing companies
in the textile industry in India.
Most of the micro-level studies have taken data from financial databases such as
PROWESS and Capitaline that provide time-series data for all listed companies and many
unlisted companies (Kumar and Basu, 2008; Joshi and Singh, 2010; Sharma and Mishra,
2011; Deshmukh and Pyne, 2013). For this study, micro-level panel data for six years from
2007-2008 to 2012-2013 has been taken from the Ace Equity Plus database by Accord
Fintech Pvt., Ltd. Ace Equity Plus is similar to the popular financial databases such as
PROWESS and Capitaline. In addition, it facilitates data extraction by providing data for a
larger number of companies and a convenient interface. In the Ace Equity database, 1,366
companies or firms were covered under the division 13 – “Manufacture of Textiles” as per
National Industrial Classifications (NIC) 2008. The sample is restricted to 160 firms that
have investment in plant and machinery exceeding INR 25 lacs and having the required
balanced panel data. Out of the total sample, 94 firms were exporting and 66 firms were
non-exporting. Out of the sample, only 24 firms were small-scale firms. Within the
small-scale firms, only six firms were exporting firms. Large-scale firms form the majority of

VOL. 19 NO. 4 2015 MEASURING BUSINESS EXCELLENCE PAGE 77

 the total sample as well as under the two categories of exporting and non-exporting firms.
The effect of scale on productivity is excluded from the discussion due to such a
distribution pattern.
A single output–multiple inputs model has been considered for the empirical analysis.
Financial equivalents for output variable and four input variables – labour, capital, material
and power have been extracted from the financial statements of the companies. For
conducting DEA, these figures are deflated into real values using price indices (Kumar and
Basu, 2008; Joshi and Singh, 2010), see Table I.

4. Analysis and findings

There is no clear trend emerging in TFP change for the textile manufacturing industry in
India over the study period. Recently, in 2011-2012 and 2012-2013, the index is showing
improvement in productivity growth (Figure 2).
The textile industry, on average, has shown growth in the TFP at 1.2 per cent per annum
over the study period. Pure efficiency change has improved consistently in the three recent
years and this needs to be maintained to enhance productivity performance in textile
manufacturing. Highest TFP change has been observed in the year 2012-2013, resulting
from improvement in both technology change and pure efficiency change Table II.

Table I Variables and relevant deflators

Variable (financial equivalent) Price index applied: base year
Output (gross sales) Wholesale price index (WPI) for textiles: 2004-2005 ⫽ 100
Material (raw materials consumed) WPI for Textiles: 2004-2005 ⫽ 100
Power (power and fuel) WPI for fuel and power: 2004-2005 ⫽ 100
Labour (salaries, wages and bonus) Consumer price index for industrial workers (CPI-IW):
2001 ⫽ 100
Capital (net block) WPI for textile machinery: 2004-2005 ⫽ 100
Notes: WPI is obtained from the Office of the Economic Adviser (OEA) to the Government of India,
the Ministry of Commerce and Industry of India. All-India average CPI-IW has been obtained from the
Labour Bureau, Ministry of Labour & Employment, Government of India

Figure 2 Trends in MPI for Indian Textile Industry (total sample)

1.08
1.06
Value of MPI (TFPCH)

1.04
1.02
1
0.98
0.96
0.94
0.92
2008-09 2009-10 2010-11 2011-12 2012-13

Table II Annual estimates for TFP and its components for the textile manufacturing
industry (total sample)
Year EFFCH TECHCH PECH SECH TFPCH

2008-2009 0.979 1.042 0.986 0.993 1.020

2009-2010 0.940 1.084 0.930 1.010 1.018
2010-2011 1.017 0.962 1.024 0.993 0.979
2011-2012 1.081 0.913 1.007 1.073 0.986
2012-2013 0.998 1.063 1.040 0.960 1.061
Mean 1.002 1.011 0.997 1.005 1.012

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Further analysis reveals that, out of the total sample, majority of the firms show average
improvement in TFP, technology change and scale efficiency change. However, in terms of
pure efficiency change, majority of firms have a poor performance and report deterioration
(Table III).
The analysis reveals that significant productivity differences exist between firms that
export and firms that do not export. Exporting firms, on average, show annual growth of
2.2 per cent in the TFP, whereas the non-exporting firms show a regress of 0.1 per cent
(Table IV).
There are differences in the performance of component indices as well. Exporting firms
show comparatively higher improvement in scale efficiency change and technology
change along with lower regress on pure efficiency. Technology change and scale
efficiency change appear to be the major sources of productivity gain for exporting firms
(Figure 3).
The deterioration in pure efficiency is marginal and at 0.1 per cent per annum for the
exporting firms, whereas it is at 0.6 per cent per annum for the non-exporting firms. This
seems to imply that exporting firms have lower wastage and better resource utilisation.
However, pure efficiency component needs to be worked on and addressed in both the
groups (Figure 4).
Around 78 per cent of exporting firms have shown productivity growth as compared to only
around 55 per cent non-exporting firms. In terms of technology change, exporting firms

Table III Distribution of firms based on productivity performance

Group Performance EFFCH TECHCH PECH SECH TFPCH

Total sample Improvement 77 116 48 87 109

Stagnation 11 0 36 17 2
Deterioration 72 44 76 56 49
160 160 160 160 160

Table IV Average estimates of indices and their percentage change for exporting &
non-exporting firms
Group Average EFFCH TECHCH PECH SECH TFPCH

Exporting firms Value of index 1.006 1.015 0.999 1.008 1.022

Change (%) 0.6 1.5 ⫺0.1 0.8 2.2
Non-exporting firms Value of index 0.995 1.004 0.994 1.002 0.999
Change (%) ⫺0.5 0.4 ⫺0.6 0.2 ⫺0.1

Figure 3 Average percentage change per annum in MPI and components for
exporting and non-exporting firms

2.5
Avergae % Change per annum

1.5

1
E ng Firms
0.5
Non-E ng Firms
0

–0.5

–1
EFFCH TECHCH PECH SECH TFPCH

VOL. 19 NO. 4 2015 MEASURING BUSINESS EXCELLENCE PAGE 79

 Figure 4 Distribution of exporting and non-exporting firms based on productivity
performance (TFPCH)

Expor ng Firms Non -E xpor ng Firms

2%
Stagna on 45%
20%

Regress

Progress
78% 55%

perform much better with almost 79 per cent reporting improvement against almost 64 per
cent for the non-exporting group. Exporting firms perform better than non-exporting firms in
terms of scale efficiency and pure efficiency components as well. Hence, overall
performance of exporting firms is better than non-exporting firms for total factor productivity
and its component sources (Table V).

5. Conclusion
The textile industry is a focus area for the Government of India. Many government
policies, schemes and initiatives for promoting textile exports from India are currently
operational under the purview of different export promotion councils. Most of the
measures are concerned with marketing and export promotion. The empirical findings
of this paper support the export promotional outlook in public policy in India. In
addition, the paper contributes to existing literature by identifying the core action area
for improving productivity performance in Indian textile manufacturing. In relation to the
first objective mentioned in Section 2, the analysis reveals that productivity
performance of exporting enterprises is better than non-exporting enterprises. With
regard to the second objective related to the sources of productivity growth, technology
change and scale efficiency change are seen to be driving productivity gains for
exporting enterprises. Pure efficiency change has shown deterioration for both
exporting and non-exporting firms in the textile manufacturing industry. This reflects
wastage and under-utilisation of resources. To sustain growth in the long run, it is
important to innovate and improve technology. However, technology advancement and
the accompanying productivity gains are restricted beyond a limit. Improvements in
pure efficiency change are critical to sustaining growth in productivity (Mahadevan,
2002). Efficiency in operations and resource utilisation are the pressing concerns in
textile manufacturing industry in India. In respect of the third objective, on the basis of

Table V Distribution of exporting and non-exporting firms based on productivity

performance
Group Performance EFFCH TECHCH PECH SECH TFPCH

Exporting firms Improvement 47 74 31 54 73

Stagnation 7 0 20 8 2
Deterioration 40 20 43 32 19
94 94 94 94 94
Non-exporting firms Improvement 30 42 17 33 36
Stagnation 4 0 16 9 0
Deterioration 32 24 33 24 30
66 66 66 66 66

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the results, it is suggested that, apart from strengthening the existing export promotion
measures in the textile industry, manufacturers should be encouraged to operate
efficiently and improve productivity. Optimum productivity from costly and scarce
resources can be achieved through effective resource utilisation. Fiscal benefits may
be linked to adoption of efficient techniques by textile manufacturers and the
performance on specified efficiency parameters. In addition to the existing measures
for labour welfare, training and skill development initiatives should be adopted to
improve the abilities of managerial personnel in the industry. The focus on innovation
and enhanced productivity will not only help capture the domestic market but also tap
the opportunities emerging in the global market.

5.1 Limitations of the paper

The paper is limited by its choice of industry, reference database and the methodology
applied. DEA as a methodology has certain disadvantages. It “does not account for noise
and cannot be used to conduct conventional tests of hypotheses” (Coelli et al., 2005).

5.2 Future scope

There is scope for further micro-level research to analyze the differences in drivers of
productivity for exporting and non-exporting enterprises. Further research could also help
identify the optimum action areas for the textile industry in India and suggest suitable
practical measures to promote efficiency. Interestingly, five out of six small-scale exporting
firms showed improvement in productivity. It would also be worth investigating in detail the
effect of scale on productivity.

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Additional reading
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 About the authors
Dhwani Gambhir is Research Scholar in the Department of Management Studies in
Indian Institute of Technology Delhi (IITD). She is a recipient of the Junior Research
Fellowship (JRF) from the University Grants Commission (UGC) of India. Her research
interests include productivity and efficiency analysis, small business and women
entrepreneurship. Dhwani Gambhir is the corresponding author and can be contacted at:
dhwanigambhir@gmail.com
Seema Sharma is Associate Professor in the Department of Management Studies in Indian
Institute of Technology Delhi (IITD). She has done her PhD in Economics from IITD. Her
areas of interest include economics and statistical analysis. The major area of research,
among others, centres on productivity and efficiency analysis. She has participated and
presented her research in many national and international conferences. She has published
her research in national and international refereed journals. She has travelled to several
countries such as USA, Japan, France, Australia, Thailand and The Czech Republic.

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