Effect of Trade Liberalization on the Efficiency of Indian Dairy Industry
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India is the largest producer of milk, and the milk is the second largest agricultural commodity after rice in terms of its contribution to agricultural gross domestic product. Having achieved self-sufficiency in milk production, the emphasis now is shifting towards value addition to improve the share of dairy products in global trade, which hitherto has remained negligible. Most of the Indian dairy products are not export competitive. The lack of competitiveness is often attributed to inefficiency in the processing industry. Further, the international diary markets, however remains distorted due to protectionist policies followed in the developed world. Under such a situation India has an undaunted task to make its presence felt in the world market. Using data from Annual Survey of Industries, this study has analyzed the effects of trade liberalization on performance of dairy industry. Technical and scale efficiency were estimated using non-parametric approach called Data Envelopment Analysis (DEA). The effect of economic reforms on dairy industry was measured in terms of association between the effective protection coefficient and performance indicators of the industry. Except the employment, other indicators such as gross output, net value added, capital and labour productivity and technical and scale efficiency were negatively correlated with the protection level. This indicates that dismantling the protection structures would help improve the performance of the dairy industry.
Abstract
India is the largest producer of milk, and the milk is the second largest agricultural commodity after rice in terms of its contribution to agricultural gross domestic product. Having achieved self-sufficiency in milk production, the emphasis now is shifting towards value addition to improve the share of dairy products in global trade, which hitherto has remained negligible. Most of the Indian dairy products are not export competitive. The lack of competitiveness is often attributed to inefficiency in the processing industry. Further, the international diary markets, however remains distorted due to protectionist policies followed in the developed world. Under such a situation India has an undaunted task to make its presence felt in the world market. Using data from Annual Survey of Industries, this study has analyzed the effects of trade liberalization on performance of dairy industry. Technical and scale efficiency were estimated using non-parametric approach called Data Envelopment Analysis (DEA). The effect of economic reforms on dairy industry was measured in terms of association between the effective protection coefficient and performance indicators of the industry. Except the employment, other indicators such as gross output, net value added, capital and labour productivity and technical and scale efficiency were negatively correlated with the protection level. This indicates that dismantling the protection structures would help improve the performance of the dairy industry.
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