Towards measuring allocative efficiency in selected industries of India

This paper examines trends in allocative efficiency over the period 1960–1961 to 1986–1987 in seven Indian industries, namely refining and manufacture of sugar; petroleum refining; manufacture of chemicals, fertilizers and pesticides locomotives and parts, locomotives, and cotton textiles. We discover that allocative inefficiency has been non zero in each industry for every year. Allocative inefficiency has not declined over time in those industries where prices are administered, whereas in industries where prices are not administered it has. Industries that are predominantly in the public sector are not necessarily characterized by greater allocative inefficiency than those that are predominantly in the private sector.