Paper is a thin material mainly used for writing upon, printing upon or for packaging.
It is produced by pressing together moist fibers, typically cellulose pulp derived from
wood, rags or grasses, and drying them into flexible sheets.
Paper is a versatile material with many uses. Whilst the most common is for writing
and printing upon, it is also widely used as a packaging material, in many cleaning
products, in a number of industrial and construction processes, and occasionally as a
food ingredient, particularly in Asian cultures.
After the Second World War, a vast array of international and national institutions—
the United Nations, the World Bank, the International Monetary Fund, and a host of
non-government and government aid organizations—was created to better the lot of
the world’s poor. Conventional wisdom came to hold that improvements in
infrastructure, technology, capital markets, education, and health care would eliminate
the stark distinctions between rich and poor nations.1 Fifty years and billions of
dollars later, this wisdom has proved wrong.
At the beginning of the 1990s, the Soviet Union’s fall precipitated a new conventional
wisdom. This "Washington consensus" focused heavily on macroeconomic policies,
such as flexible exchange rates, low inflation, and government solvency, while also
embracing microeconomic elements—for instance, price decontrol, privatization, and
good corporate governance and market regulation. Market reform swept through the
world, including countries as diverse as Argentina, Brazil, India, Mexico, New
Zealand, Poland, and Russia. Most were thought to be doing virtually everything
needed to spark rapid growth.
But once again the results were disappointing. By the end of the 1990s, most of these
countries’ growth rates had returned to levels so low that the profile of the global
economic landscape wasn’t changing at all. Today more than 80 percent of the
world’s people still get by on less than a quarter of the average income in rich
countries, much as they did 50 years ago.
The falling rate of capacity utilization (CU) in the Indian paper industry in recent
years has been viewed with concern in the industry as well as the government
[Government of India 1998]. Despite the rapid growth in demand for paper and paper
product the profitability in the industry has been on decline. This is coupled with a
declining trend in total factor productivity in the industry. In fact, there are many
instances of closure of firms in the industry due to unsustainable losses. According to
a report [Economic Times, November 2000] 20 per cent production capacity remained
closed during the year 1999-2000.
Although the Indian paper industry has witnessed rapid growth in level of output,
number of production units and variety of paper and paper products over the years,
analysis of its productivity performance has been at a rudimentary level. While the
number of paper mills at the beginning of the planning era in India, i.e., 1950-51, was
only 17, presently this number has gone up to 380. Simultaneously the installed
capacity of the industry has increased from a meager 0.135 million tonnes per annum
(tpa) in 1950-51 to 4.6 million tpa in 1998-99. While production in the industry in the
beginning was limited to a small variety of paper products in the beginning, product
diversification took place over the years and by the year 1990 the paper industry was
self sufficient in most varieties of paper except in newsprint. In recent years there
have been reports of declining rates of capacity utilization and profitability [see
various issues of Report on Currency and Finance, RBI]. Recently the problem has
reached to the extent of non-viability and closure of many firms.
This study applied the Indian Paper Mill productivity index to estimate TFP growth
and its components (efficiency change and technological progress) in Indian paper
and paper products industry at the sub-sectoral level. The estimation of productivity
changes in the
Indian paper and paper products industry during the period 1980-81 to 2004-05 reveal
contradictory results at the aggregate and sub-sectoral levels. The average TFP growth
rate at the aggregate level was -8.6% in the pre-reform period, but was -5.2% in the
post-reform
The results of this study suggest the need for the implementation of specific policies
to improve technical progress and efficiency change, in order to precipitate a long-run
balance in TFP growth. Technological progress should be encouraged in industries
with slow technical progress (regress), industries with slow efficiency change rates
should be encouraged to use existing technology more effectively via increased
education and training.