AN ASSESSMENT OF THE PERFORMANCE OF INDIAN STATE-OWNED ENTERPRISES

We examine the determinants of performance of 68 Indian state-owned en terprises in the manufacturing sector for a five-year period: 1987 to 1991. Relative performance is determined using data envelopment analys is, with variations in performance patterns subsequently explained usi ng regression analysis. We note that the performance of films in the I ndian state-owned sector is characterized by both, low performance, as well as significant and systematic variations in the performance para meters. Size is positively associated and age negatively associated wi th efficiency. Further, economic liberalization and reforms aimed at i mproving the performance of state-owned firms induces efficiency gains over time. This heterogeneity within the state-owned sector has polic y implications, which we discuss, In countries which have privatized l arge numbers of their state-owned firms, it is often the larger establ ishments which have been sold to the public. The state-owned firms in the manufacturing sector that can be candidates for privatization are the smaller and older manufacturing firms. These firms may also be eas ier to dispose of to private investors. This finding reinforces our ce ntral thesis that firm-level analysis within the state-owned sector is useful and important for generating pragmatic policy guidelines.