Efficiency of the Indian leather firms: some results obtained using the two conventional methods

Indian leather industry has massive potential for generating employment and achieving high export-oriented growth. However, its economic performance has not been assessed much till date. The present paper attempts to fill in this gap by examining technical efficiency (TE) of individual leather producing firms for some years since the mid-1980’s. Analyzing the industry’s firm-level data through the two conventional tools, viz., data envelopment analysis and stochastic frontier analysis, the paper observes a significant positive association between a firm’s size and its TE, but no such clear relation between a firm’s age and TE. It also finds significant variation in TE across firms in different groups of states as well as under different organizational structures and observes some technological heterogeneity across states. Although, non-availability of panel data does not allow one to assess effects of economic reforms on the performance of the Indian leather firms, the average firm-level TE, however, seems to be on an increasing path, except for downswing in the immediate post-reform years.