Understanding Productivity Dynamics and Resilience in Indian Enterprises

Abstract

This thesis investigates the interconnected dynamics of productivity, financial constraints, and resilience among formal-sector Micro, Small, and Medium-sized Enterprises (MSMEs) in Indian manufacturing. Drawing on a plant-level longitudinal panel dataset from the Annual Survey of Industries (ASI, 2014-2020) and the World Bank Enterprise Surveys (WBES, 2014, 2022), the research makes four primary, interlinked empirical contributions.
Firstly, employing structural estimation techniques, the analysis reveals pervasive and persistent productivity heterogeneity across Indian firms, quantifying resource misallocation that suggests potential aggregate Total Factor Productivity (TFP) gains exceeding 160 per cent if distortions were removed. Secondly, the thesis develops a novel framework to measure productivity resilience - the ability of firms to sustain or recover productivity under shocks. The moment-based approach shows that resilience is strongly linked to access to finance and managerial quality. Evidence from the ASI panel indicates resilience is generally low and uneven across firms: systemic shocks, such as demonetisation can erode resilience across all firm sizes, but the effects are most damaging and enduring for micro and small enterprises.
Thirdly, by directly measuring credit constraints and integrating them into an extended structural production function model, the study demonstrates that omitting financial frictions systematically biases estimated input elasticities and inflates measured TFP by approximately four per cent. Constrained firms exhibit significantly lower productivity, underscoring the role of institutional imperfections in perpetuating inefficiency. Finally, extending the Melitz (2003) trade model using a Seemingly Unrelated Regression (SUR) framework, the research confirms that credit constraints significantly weaken the productivity-export nexus, inhibiting both international market entry and the realisation of productivity gains from trade participation.
Collectively, these findings establish that financial access is a central and binding constraint on both the efficiency and adaptive capacity of Indian MSMEs. The structural heterogeneity and market distortions observed necessitate a shift from universal industrial policies towards targeted, resilience-building interventions that integrate credit market reforms with productivity enhancement strategies.

Date of Award	3 Jul 2026
Original language	English
Awarding Institution	University of Portsmouth
Supervisor	Homagni Choudhury (Supervisor) & Konstantinos Kallias (Supervisor)