The Effect of Competitiveness and Productivity Growth on Exports of Indian Private Firms

This paper formulates a model of optimal export decision of private firms and then empirically studies the effect of firm size, import of raw materials and capital goods, competitiveness (measured in terms of price-cost-margin (PCM)), and productivity growth on export performance of Indian private firms during the period 1975-1986. The paper finds that while competitiveness, and value-added growth improved in all industries, the export perfonnance and productivity growth improved only in a few industries. Furthermore, while import of capital goods and raw materials had significantly positive effects on exports in almost all industries, competitiveness had significant positive effect only in the lighter industries (food and beverages, and textiles), productivity growth did not have significant positive effect in any industry, and firm size had significant positive effect on exports only in petro-chemical industry for firms of size higher than a threshold level.

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