Factor Analysis Approach to Investigate Productivity in Indian Sugar Industries: A Financial Ratios Approach

Indian sugar industry has proved itself to be a nucleus of rural development by providing employment to about 7.5 % of rural population and provides a significant contribution to Indian Economy. Thus, the performance of Indian sugar industry plays a significant role in Indian economy. The performance of sugar industries depends on several factors. The paper discusses the factors affecting the Indian sugar industries and explores the possible methods to improve its productivity. Strategic productivity management is one of the major strategies to overcome the problems faced by Indian sugar industries. Since a firms ’ productivity can be evaluated in terms of financial ratios, financial factors can be used as a means of managing productivity. Selection of financial ratios from the available set of published ratios is done by correlation study between Total Factor Productivity (TFP) and financial ratios. Financial factors influencing productivity are obtained using factor analysis. The paper also proposes a set of possible ways by which productivity management could be done in Indian sugar industrie