The Journal of Industrial Statistics Call for Research Papers/Articles

110 Pages·2016·18.64 MB·English

EDITORIAL
The present issue has five papers studying various aspects of units under two level
classification of the industrial sector in India. Consistent with the purpose of the journal, all
these papers use ASI data, Prowess data base published by the Centre for Monitoring
Indian Economy (CMIE) or RBI data base. Where ever the authors have used more than
one data source, they have carefully matched the data to make them comparable. As
classification of industries in ASI has changed over time, ASI time series data also need
matching. Except in one paper, the authors use descriptive and inference mode analysis,
namely, using the data to describe the state of variables and making inferences on population
parameters. In the other paper, the authors suggest some methodological improvement in
data collection in ASI. I hope, some day, the ASI data would be used in macro or micro
decisions of diverse industries.
Gopa Ghosh and Madhumati Dutta in their paper, Status of Energy Consumption in the
Manufacturing Industry of Eastern India – A Decomposition Analysis, attempt to determine
the core factors that have influenced energy consumption in manufacturing sector of
eastern states, in particular, Bihar, Chhattisgarh, Jharkhand, Odisha and West Bengal. They
use Index Decomposition Analysis – Model of Log Mean Divisia Index I (LMDI I). They
have obtained the data for the study from ASI reports for the period 2008 – 2013. Based on
the findings of the study, the authors make conclusions which would be useful in examining
and reformulation of energy policies of the states.
Foreign Direct Investment and Exports are of concerns to any country like India. Abhishikta
Acharyya (Roychowdhury) and Bibek Ray Chaudhuri take up some of these concerns in
their paper, Outward FDI vs. Exports: the Case of Indian Manufacturing Firms. In
particular, the authors re-examine the “determinants of the export and FDI decision”. They
relate FDI and export decision with firm characteristics which include R & D intensity, firm
size, and age of firms, credit constraint, and international experience. Based on extensive
literature search they formulate five hypotheses. They formulate a Multinomial Logit model.
They obtain some firm level data from published monthly outward FDI data published by
RBI (2008 – 12). They get other data from CMIE Prowess data base. The interesting results
are: size of firms affects the probability of internationalization; financial constraints make
firms stay on domestic market; firms resorting to both domestic and foreign mode choice
have high debt/equity ratio in India; Firms with higher productivity are more likely to
choose FDI over exports; firms’ choice of FDI or export in a year is dependent on its
internationalization in the previous year; although more R&D leads to choice of export over
domestic, more R&D expenditure to sales, however, increases probability of choosing
export over FDI.
In their paper, Growth of Capital Stock in Organised Manufacturing Sector - Impact of
Recession, Atanushasan Basu and Shreya Sengupta study how capital stock in
manufacturing has been affected by the recession after 2008. They consider years 2004-05
to 2007-08 as pre recession period and years 2008 – 09 and 2012 – 13 as post recession
period. They use linear regression to study growth in pre and post recession era and
compare the growths in pre and post recession years. They find that on the whole industries
have low growth in the post recession years. The recession has varying effect on capital
stock in different industry groups. The analyses show that the growth of fixed capital
ii
(investment) in industries which include “textiles and wearing apparel, leather and related
products, paper and paper products, coke and refine petroleum products, chemical and
chemical products, other non-metallic mineral products, computer, electronic and optical
products, and other transport equipments” have been significantly affected by the
recession.
G. C. Manna and Sudipta Bhattacharya in their paper, An Empirical Study on the Relative
Efficiency of Panel Survey in the Annual Survey of Industries, address to a methodological
issue related to ASI. In ASI, firms are grouped into two, one consisting of firms employing
more than 100 employees called ‘census sector’ and the rest of the firms are called ‘sample
sector’. In ASI, all firms in the census sector are surveyed, whereas from the sample sector,
each year a sample of firms is chosen for the survey. This implies that the list of firms to be
surveyed from the census sector would be the same over the years, whereas the list of firms
to be surveyed from the sample sector would be different from year to year. Manna and
Bhattacharya raise an issue of efficiency in estimation of parameters from such procedure.
They examine for four selected states, the estimation of parameters using the data from
independent sample firms each year from sample sector, and the estimation of parameters
using the data from the survey of a panel firms each year. They show evidence that use of
panel data would be more efficient than the current procedure in estimation of parameters.
In the paper, A Study of Certain Useful Business Parameters based on ASI 2012-13
results, T. K. Sanyal and A. K. Panigrahi have used ASI data to compute certain financial
parameters, specially, parameters reflecting ‘liquidity aspects’ of industries. In particular,
they have computed seven ratios, namely, Current ratio, Quick Ratio, Working Capital as
percentage of Sales, Debtor days, Creditor Days, Inventory days and Cash Conversion
Cycles for different industries for each year for the period 2008-09 to 2012-13. These ratios
would reflect average health of firms in terms of liquidity. Each firm can use them to compare
its own liquidity position with the average of the industry it is in. It can also see the
industry trend in various aspects of liquidity over time and compare them with those of its
own.
March 2016 Jahar Saha
Kolkata Member, Editorial Board
iii
SECTION I : ARTICLES
Page No.
• Abhishikta Acharyya (Roychowdhury) 1
and Bibek Ray Chaudhuri
Outward FDI vs. Exports: The Case of Indian
Manufacturing Firms
• T. K. Sanyal and A. K. Panigrahi 22
A Study of Certain Useful Business Parameters
based on ASI 2012-13 results
• G. C. Manna and Sudipta Bhattacharya 48
An Empirical Study on the Relative Efficiency of
Panel Survey in the Annual Survey of Industries
• Gopa Ghosh and Madhumati Dutta 58
Status of Energy Consumption in the Manufacturing
Industry of Eastern India – A Decomposition Analysis
• Atanushasan Basu and Shreya Sengupta 77
Growth of Capital Stock in Organised Manufacturing
Sector- Impact of Recession

The Journal of Industrial Statistics (2016), 5 (1), 1 - 21 1
Outward FDI vs. Exports: The Case of Indian Manufacturing Firms
Abhishikta Acharyya (Roychowdhury),1 Confederation of Indian Industries,
Kolkata, India
Bibek Ray Chaudhuri, Indian Institute of Foreign Trade, Kolkata, India
Abstract
Internationalization experience of Indian manufacturing firms gained momentum during
the last decade or so. In this paper we look at the determinants of entry mode choices
made by these firms. Exploiting the firm-level Outward Foreign Direct Investment data
published by RBI this study tries to explain the determinants of entry mode choices made
by Indian manufacturing firms during the years 2008-09 to 2012-13. This data has been
supplemented by matching firm-level characteristics obtained from CMIE PROWESS
database to that of RBI data to test the various hypotheses. Results show that size,
productivity lag and past international experience are significant determinants of entry
mode choice made by Indian manufacturing firms.
1. Introduction
1.1 Indian firms are getting increasingly internationalized. The major drivers behind
this trend are increase in liquidity in the economy given favorable macroeconomic policies,
low-cost labor, efforts towards moving up the value chain, leveraging insights gained from
servicing customers in the domestic economy, and strong economic growth during the
years 2001-2005 which improved balance sheets of the Indian firms making it possible for
them to raise capital (Financial Times (2006)). Indian exports grew at 14.14% CAGR between
the years 2004-05 to 2013-14 from US$ 83535.93 million to US $ 313542.89 million (See Figure
1). Top five export destinations being: United Arab Emirates, USA, Singapore, China and
Hong Kong comprising around 37% of India’s exports. The main export items are petroleum
(crude & products), gems & jewelry, transport -equipment, machinery and instruments,
drugs, pharmaceuticals & fine chemicals.
1.2 On the other hand, India accounts for 0.6% of outward foreign direct investment
of the world. Top five FDI destinations are: Singapore, Mauritius, Netherlands, USA and
UAE. Indian outward FDI grew at 23.89% between 2000-01 and 2011-12 from US$ 677.67
million to US $ 8861.46 million (See Figure 2). Major sectors engaging in overseas
investments are: Manufacturing (including oil sector), Financial Insurance, Real Estate
Business & Business Services, Wholesale & Retail Trade, Agriculture & Allied activities,
Transport, Communication & Storage Services, Restaurants & Hotels, Construction,
Community, Social & Personal Services and Electricity and Gas & Water.
1.3 The increase in export and foreign direct investment implies rising integration
with world economy. In traditional theories of international trade and multinationals these
act as substitutes to serve overseas markets. Brainard (1997) empirically established that,
firms export when there are cost advantages to concentration (economies of scale) and
1e-mail : [email protected]
2 The Journal of Industrial Statistics, Vol. 5, No. 1
establish foreign production facility when proximity to local market is more important. But,
that could not explain why firms within each industry facing same industry costs make
different entry choices. Helpman, Melitz and Yeaple (2002) explained that with firm
heterogeneity, only the most productive firms find it profitable to meet the higher costs
associated with FDI; the next set of firms find it profitable to serve foreign markets through
exporting; while the least productive firms find it profitable to serve only the domestic
market. Findings of Clerides, Lach and Tybout (1998); Bernard and Jensen (1999, 2004);
Head and Ries (2003); Tomiura (2007); and Todo (2009) among many others are consistent
with theoretical predictions of the heterogeneous-firm trade models.
1.4 The consistency between theory and empirics has given a direction to understand
firms’ internationalization strategy. However, in some cases, it is found that a number of
firms that are as productive as those engaged in export or FDI do not take part in either of
the international activities. Hence four types of firms have been conceived in the literature
according to degree of internationalization, namely those serving only the domestic market
(“domestic firms”), those engaging in export but not in FDI (“pure exporters”), those engaging
in FDI but not in export (“pure FDI firms”), and those engaging in both (“export and FDI
firms”). On an average, firms serving only the domestic market are less productive than
exporters and FDI firms, but the distribution of the four types of firms overlaps with each
other to a great extent. In other words, many firms do not serve foreign markets although
they are as productive as many exporters and FDI firms. This evidence suggests that there
should be other key determinants of firm-level internationalization besides productivity
(Mayer and Ottaviano, 2007; Todo 2009).
1.5 Thus, this study re-examines determinants of the export and FDI decision,
incorporating firms characteristics like R & D intensity, firm size, age of firms, credit constraint,
international experience etc; paying special attention to the magnitude of the impact of
each determinant in addition to its statistical significance. This study should be particularly
relevant as work on Indian firms in this sphere has been few. Again, emerging country
strategies for internationalization may be different from firms from developed countries.
Moreover, in case of Indian firms as predicted by Melitz (2003) that only larger and more
productive firms export, may not be true. In this country around 40% of the exports are by
small and medium enterprises (EXIM Bank 2012). Hence the theory that only bigger firm
engages in internationalization is not true in the Indian context. Armenter and Koren (2009)
shows that latent heterogeneity across firms can explain export by relatively small firms.
Even low productivity firms may export if e.g. costs of transportation of their product are
less. Thus it would be interesting to test certain hypotheses related to this phenomenon in
the Indian context. This paper contributes in understanding the decision regarding FDI vs.
exports by considering firm-level characteristics for the manufacturing sector as a whole.
Matching RBI OFDI data with other firm-level variables obtained from CMIE PROWESS
this is one of the first attempts to look at internationalizing decisions by Indian
Manufacturing firms.
2. Research hypotheses
2.1 Productivity
Recent empirical studies on international trade at the firm level have found that firms
engaged in export or foreign direct investment (FDI) are generally more productive and