Efficiency and Performance of Manufacturing Sector in India: An Application of Data Envelopment Analysis

Abstract

To compete in this globalized world, productivity of manufacturing sector is crucial factor. The significance of productivity in increasing national welfare is now universally recognized. In every county, industry or organization, the main source of economic growth is a result of an increase in productivity. Nowadays, it is widely accepted that productivity is a key performance benchmark for firm involved in the manufacturing sector. This is because improvement in productivity is related to increased profitability, lower costs and sustainable competitiveness. In this paper an attempt is made to assess the performance and efficiency of the manufacturing sector of India based on financial variables for the period from 2008-09 to 2012-13. Data Envelopment Analysis method is employed to assess the efficiency of sub-sectors by considering operating expenses and net fixed assets as inputs, and sales and profit after tax as outputs. The study highlighted Consumer goods sector, Construction materials sector and Machinery sector are consistently efficient and their performance in terms of return of investment is comparatively better than the rest of the sub-sectors. Further super efficiency model highlighted construction material sector as the most efficient sector. Spearman rank correlation and concordance analysis showed stability in efficiency rankings of subsectors over the period of time.