An empirical study on productivity analysis of Indian leather industry

Purpose It is essential to track the development of resource and pollution intensive industries such as textile, leather, pharmaceutical, etc., under burgeoning pressure of environmental compliance. Therefore, the purpose of this paper is to analyze the progress of Indian leather industry in terms of individual factors and total factor productivity. Design/methodology/approach This study applies and examines the various concepts of productivity such as labor productivity, capital productivity, material productivity and energy productivity. Further, it assesses and compares the performance of Indian leather industry in Tamil Nadu (TN), West Bengal (WB) and Uttar Pradesh (UP) based on productivity analysis, spatial variations determinants in productivity and technology closeness ratio. Findings The findings suggest that as per the productivity analysis, WB leather clusters have performed remarkably better in terms of partial factor productivity and technical efficiency (TE), followed by TN and UP. This can be attributed to shifting of leather cluster of WB to a state-of art leather complex with many avenues for resource conservation. Further, the findings reveal that the firm size and partial factor productivities have significant positive correlation with TE which supports technological theory of the firm. Practical implications The results of this study can be useful for the policy makers associated with the Indian leather industry especially to design interventions to support capacity building at individual firm level as well as cluster level to enhance the efficiency and productivity of overall industry. Social implications The findings also support the resource dependence theory of firm according to which the larger size firms should reflect on resource conservation practices, for instance the concept of prevention is better than cure based upon 3R (reduce, recycle and reuse) principles. Originality/value The paper gives an explanation of the productivity in the leather industry in terms of its factor productivity and TE.