Effect of Trade Liberalization on the Efficiency of Indian Dairy Industry

• Published in: Journal of international and area studies Vol. 17; no. 1; pp. 1 - 15
• Main Authors: Kannan, Elumalai, Birthal, Pratap S.
• Format: Journal Article
• Language: English
• Published: Seoul Institute of International Affairs Graduate School of International Studies Seoul National University 01-06-2010; School of International and Area Studies, Seoul National University; 국제학연구소
• Subjects: Agricultural commodities; Competition; Dairy industry; Dairy products; Data envelopment analysis; Econometrics; Economic Change; Economic performance; Economic reform; Efficiency; Food industries; Free Trade; Indexes (Measures); India; Industrial efficiency; Industrial productivity; Industry; International market; International markets; International Trade; Manufacturing industries; Markets; Milk; Milk production; Productivity; Studies; Technical efficiency; Trade liberalization; Value added; Working capital; 정치외교학; India
• ISSN: 1226-8550; 2765-1800
• DOI: 10.23071/jias.2010.17.1.1

India is the largest producer of milk, and milk is the second largest agricultural commodity after rice in terms of its contribution to agricultural gross domestic product. Having achieved self-sufficiency in milk production, the emphasis now is shifting towards value addition to improve the share of dairy products in global trade, which hitherto has remained negligible. Most of the Indian dairy products are not export competitive. The lack of competitiveness is often attributed to inefficiency in the processing industry. Further, the international diary markets, remains distorted due to protectionist policies followed in the developed world. Under such a situation India has a daunting task to make its presence felt in the world market. Using data from Annual Survey of Industries, this study has analyzed the effects of trade liberalization on performance of dairy industry. Technical and scale efficiency were estimated using non-parametric approach called Data Envelopment Analysis (DEA). The effect of economic reforms on dairy industry was measured in terms of association between the effective protection coefficient and performance indicators of the industry. Except the employment, other indicators such as gross output, net value added, capital and labour productivity and technical and scale efficiency were negatively correlated with the protection level. This indicates that dismantling the protection structures would help improve the performance of the dairy industry.