Vinish Kathuria

Productivity spillovers from technology transfer to Indian manufacturing firms

The present paper employs techniques from stochastic production frontier and panel data literature to test a spillover hypothesis for large sized firms that ‘presence of foreign‐owned firms and foreign technical capital stock in a sector leads to reduced dispersion in efficiency in the sector and fall is higher for the firms that invest in R&D activities’. Dispersion being a relative concept, it may still fall if both the leading foreign firm and domestic firms show fall in technical efficiency over the period and the fall for the leader is higher and vice versa. Given the focus of the study, where concern is for the learning by the domestic firms, the study tries to get around with the problem partially, by testing the hypothesis for those local firms that have shown productivity improvement over the period. Results suggest that foreign‐owned firms are close to the frontier in 13 of the total 26 sectors studied. Spillovers result for these 13 sectors indicate that there exist negative spillovers from the presence of foreign firms in the sector, but available foreign technical capital stock has a positive impact. Interesting differences emerge when the sample is bifurcated into scientific and non‐scientific subgroups. Results for the scientific subgroup indicate that the indirect gains or spillovers are not automatic consequence of foreign firms presence, but they depend to a large extent on the efforts of local firms to invest in learning or R&D activities so as to decodify the spilled knowledge. On the other hand, the evidence of spillovers to non‐scientific non‐FDI firms is not very strong. Copyright

VEHICULAR POLLUTION CONTROL IN DELHI

Delhi is one of the most polluted cities in the world caused by spectacular vehicular growth in the past 2–3 decade. To restore the air quality and refurbish its image, a number of command and control policy instruments have been implemented in Delhi. The paper attempts to investigate whether the enactment of policy instruments and the efforts have led to commensurate fall in air pollution in Delhi. The analysis shows that the imposition has not resulted in concomitant improvement in ambient air quality. One of the reasons is reliance on new vehicles, with little emphasis on in-service vehicles. Even with new vehicles, the focus is on emission limits not on the limit on ambient air quality. With between 370 and 600 new vehicles being registered every day, any expectation of improvement in air quality is far-fetched. The paper concludes that the containment of vehicular pollution requires an integrated approach, with combined use of transport policies and air pollution control instruments.

Technology transfer for GHG reduction ☆: A framework with application to India

Abstract The Framework Convention on Climate Change (FCCC) expressly commits the Annex I countries to provide financial resources and technology to developing countries so as to control, reduce, or prevent greenhouse gas (GHG) emissions. The present paper argues that the ultimate goal of any action in the field of transfer of technology (TT) should not be only just to apply particular technological solutions to the GHG problem but to enhance the capabilities of developing countries to assess the need, select, import, assimilate, adapt, and develop the appropriate technologies. The paper also looks into the various dimensions of TT that results in capacity building in developing countries. Using case studies of two GHG-reducing technologies, one from the demand side [compact fluorescent lamp (CFL)] and the other from the supply side [photovoltaic (PV) cell], the paper tries to find out whether TT has been adequate in significant capacity building. The case studies show that the technology absorption is still incomplete. High up-front costs and lack of awareness (information) has resulted in significant underutilization of capacities, thus acting as major barriers in their diffusion. The paper also looks into the various market- and government-related barriers forestalling the diffusion of various GHG-reducing technologies.

Is Economic Growth Sustainable? Environmental Quality of Indian States Post 1991

This study attempts to investigate the relationship between Environmental Quality (EQ) and per capita NSDP (i.e., Environmental Kuznets Curve, EKC) of 14 major Indian States, in the light of their high economic growth in the post-liberalisation period. The analysis involves first ranking the States on the basis of their EQ, and then checking the relationship. The results indicate that the relationship between EQ and per capita NSDP is slanting S-shaped. Except Bihar, all the States are on the upward sloping curve of the EKC. The results suggest that the economic growth is mostly at the cost of EQ.

Does the Technology Gap Influence Spillovers? A Post-liberalization Analysis of Indian Manufacturing Industries

The purpose of this article is twofold: first to examine spillovers from existing foreign firms in India to local firms and whether the technology gap between foreign and domestic firms has any role to play in influencing spillovers; and second, to investigate whether the liberalization of the 1990s resulting in increased inflow of foreign direct investment (FDI) has had any influence in increasing the productivity of Indian firms. Using panel data for 1840 firms from 1995 to 2005, this study finds that in a large number of industries domestic firms are more productive than foreign firms, thereby precluding the possibility of spillovers to all the sectors. Even in the sectors where foreign firms are more productive and the technology gap is accounted for, there is no evidence of spillovers resulting from the presence of foreign firms. Similarly, FDI inflow seems to have no impact on productivity once industries are divided according to the size of the technology gap.

Role of Externalities in Inducing Technical Change: A Case Study of the Indian Machine Tool Industry

Abstract The role of externalities in generating and diffusing technical change has been highlighted prominently in the past few years. The externalities assume added relevance if the technical change in the industry is itself fast. In this article, a framework is developed to explain the role of externalities in inducing technical change in one such fast changing industry—the machine tool industry. The framework is then applied to an important segment of the Indian machine tool industry, the Computer Numerically Controlled (CNC) lathe segment. The primary survey of firms shows that externalities in the form of feedback from users, suppliers, presence as well as products of competitors, participation in exhibitions/fairs, and workers’ suggestions are some of the most important factors in inducing technical change in the segment.

Is Manufacturing an Engine of Growth in India in the Post-Nineties?

This article tests whether manufacturing has acted as an ‘engine of growth’ for the Indian states in the post-1990s.Our methodology involves regressing the state domestic product (SDP) growth rates on growth rates of manufacturing. If the coefficient of manufacturing growth is higher than the share of manufacturing in SDP, this is interpreted as supporting the engine of growth hypothesis. The results indicate that manufacturing has acted as an engine of growth in the post-nineties despite its declining share over the period. However, our study rules out the role of scale economies propelling productivity growth in the sector. Our analysis also suggests that it is primarily factor accumulation and not productivity growth that is driving output. Our characterisation of states based on output growth, TFP growth and employment growth suggests that for some states the current trend of growing without creating employment and improving TFP will not be sustainable.

State business relations and manufacturing productivity growth in India

Empirical studies on total factor productivity growth (TFPG) in developing countries highlight trade open-ness, research and development and market structure as being the most important determinants of TFPG. The role of institutions remains overlooked in the literature on the determinants of TFPG. In this paper, we look into the role of institutional quality as captured by effective state-business relationships (SBRs) in influencing TFPG, using Indian manufacturing as a case-study. By SBRs we mean a set of highly institutionalised, responsive and public interactions between the state and the business sector. To compute TFPG, we use firm level data for both the formal and informal manufacturing sector. We correct for the simultaneity bias associated with the production function approach for TFPG estimation by employing a method developed by Levinsohn and Petrin. We propose measures of effective SBRs for 15 Indian States over the period 1994-2005, and then use them in TFP growth equations to estimate the effect of SBR on TFPG. The results indicate that SBR has positively affected the TFP growth of Indian industry. The effect however is primarily for the formal sector.

The Role of Access Mechanisms in Effective Rehabilitation of Displaced Farmers Due to Development Projects

Abstract This paper provides an access based explanation of why institutional arrangements of compensation provision for land acquisition often fail to effectively rehabilitate displaced farmers in a developing country context like India. Farmers have a right to claim compensation in case of land takings, which specifies two methods of claim: consent method and arbitration method. Literature indicates that farmers’ choice between the two methods has a significant impact on the compensation they receive. Using a binary response model on a primary dataset of 199 displaced farmers from Upper Krishna Irrigation Project, India, we analyse the determinants of this choice. We validate ‘access based’ hypotheses in choice of compensation and test whether in addition to allocated property rights, benefits actually depend on the ‘access mechanisms’ farmers have. Results suggest that the choice is governed by access to social identity and information. Therefore, farmers lacking these fail to get resettled despite the presence of a policy framework aimed at their rehabilitation.

Environmental Cost of Using Top-soil for Brick-Making

Increased urbanisation and industrialisation in developing countries has created a huge demand for construction activities, which in turn has resulted in the fast growth of the brick-making industry. Unfortunately, brick-kilns are mostly situated on fertile agricultural land, as brick manufacturers need silty clay loam to silty clay soils with good drainage conditions. This article quantifies the agricultural impacts of top-soil removal for brick-making using a productivity change and replacement cost approaches, for Tamil Nadu, a southern state of India. To compute the cost, a survey of 100 farmers each was carried out in two regions—in the north (Chennai) and in the south (Tuticorin). Besides, 60 soil samples—30 from each region—were analysed from both types of fields—leased land for brick-making and virgin fields. The crop yield loss due to top-soil removal is found to be much less than expected due to more fertile soil in the region. In the long run, however, the opportunity cost of selling top-soil for brick-making is likely to increase as good quality soils for agriculture become more and more scarce.