dc.description.abstract | IN a recent study. Tota l Factor Productivity
Growth in the Manufacturing Industry in
India', Balakrishnan and Pushpangadan
(1994, henceforth B-P 1994) have attempted
a very interesting exercise. They argue that
the estimate of Total Factor Productivity
Growth (TFPG) is highly sensitive to the
way the real value added is measured. With
the help of the example of the growth
experience of the manufacturing industry in
India, B-P (1994) have tried to show that
measurement of real value added by the
double deflation method, instead of single
deflation method which is more widely used
by the researchers, not only alters
quantitatively the estimate of TFPG, but also
affects qualitative conclusions about the
behaviour of TFPG over time. Thus they
argue that if double deflation method is
used, during the decade of the 80s TFPG
does not show any acceleration over the
previous period. Rather TFPG during the
70s turns out to be higher than during the
80s. In the present note we would like to
show that (1) the qualitative conclusion about
the behaviour of TFPG in the Indian
manufacturin g industr y ove r time ,
particularly during the 80s as compared to
the 70s, does not change if sufficient care
is taken about applying the double deflation
method; and (2) the double deflation method
per se is not necessarily superior to the single
deflation method. | |