Open AccessTrends in Productivity Growth of Indian Pharmaceutical Industry: A Growth Accounting Analysis
Author(s) -
Ariful Hoque,
Sumit Das
Publication year - 2021
Publication title -
journal of pharmaceutical research international
Language(s) - English
Resource type - Journals
ISSN - 2456-9119
DOI - 10.9734/jpri/2021/v33i47a33031
Subject(s) - total factor productivity , growth accounting , productivity , economics , pharmaceutical industry , product (mathematics) , production (economics) , multifactor productivity , solow residual , agricultural economics , macroeconomics , mathematics , medicine , geometry , pharmacology
The pharmaceutical industry of India is one of the most rapidly expanding research-based industries of Indian manufacturing. This paper attempts to examine the trends in partial and total factor productivity (TFP) growth of India’s pharmaceutical industry using industry-level time series data covering a period of 25 years from 1993-94 to 2017-18, which is further divided into pre-product and post-product patent periods. Three alternative indices of growth accounting approach viz., Translog, Solow, and Kendrick have been used to measure the growth of total factor productivity with four input production framework. The study results indicate significant increasing trends in capital intensity as well as labour, energy and material productivity and a significant declining trend in capital productivity over the entire study period. This study also finds a positive turnaround in the TFP growth of Indian’s pharmaceutical industry during the post-product patent era. The decomposition analysis confirms that output growth in the pharmaceutical industry is input-driven rather than productivity-driven as TFP growth contributes only 8.5 percent to the observed output growth. From the policy standpoint, this paper also suggests greater emphasis on resource efficiency by improving the quality of factor inputs, particularly capital, through increased R&D activities and adoption of cutting-edge technology.