Econometrica: Apr, 1957, Volume 25, Issue 2
Production Functions for Indian Industry
V. K. Sastry, V. N. Murti
This study involves the estimation of production functions of the Cobb-Douglas type in application to Indian industry. The few studies which have appeared so far on this particular aspect of Indian industry were concerned with the industrial sector as a whole based on cross-section data for industrial aggregates. Such production functions for the industrial sector as a whole can be regarded as some sort of an average of those for individual industries producing homogeneous products; but the divergences in this quantitative relationship among different types of individual industries depending on such factors as the degree of substitution that is possible between different factors of production, the capital intensity of the industry, etc., can be studied only when production functions are available separately for individual industries. In the present study, production functions for the industrial sector as a whole as well as for seven important industries in India are worked out based on cross-section data relating to individual firms for the two years 1951 and 1952. An interesting application of production functions of the Cobb-Douglas type has also been made to estimate the total capital employed in 1952 in Indian industry as a whole and in the three major industries of cotton, jute, and tea, separately.