Did productivity converge in manufacturing sector across Indian states?

This paper aims to explore the labour productivity convergence in manufacturing sector across fifteen major Indian states during 1979-80 to 2000-01, using cross-section analysis. The analysis examines the convergence hypothesis taking both absolute and conditional convergence into consideration. The results indicate that though absolute β convergence in labour productivity does not exist during overall period of analysis, labour productivity does converge in pre-reform period. Analyzing conditional convergence using dynamic panel model, we find that labour productivity in rich states grew faster with reasonably high initial productivity levels, indicating a divergence across the states. In light of the above-affirmed empirical results, the study suggests that better endeavors for productivity growth of manufacturing sector in backward states are quite essential. The government should give more emphasize to the labour intensive manufacturing industries which can absorb the mass un-skilled labour force in eastern and northern states of India