Transfer of technology to India: A case study

This dissertation examines the effect of capital goods imports embodying advanced technology, on the productivity of the Indian manufacturing industry. The study covers the post-independence period from 1950 to 1987. The model uses the production function approach to analyze the impact of technology imports on economic growth. Various specifications of the production function have been used to estimate the parameters of the production function. The objective of this dissertation is to show that imported capital has a positive and large incremental effect on manufacturing output. The hypothesis to be tested, is whether marginal productivity of foreign capital goods imports (assumed to embody advanced technology) is greater than that of domestic capital. This paper supports the traditional view of capital investment as a vehicle of growth which contributes to productivity and growth of developing countries. Regression results demonstrate the conclusion that imports of machinery and transport equipment (i.e. foreign capital goods imports) has a greater marginal productivity than domestic capital. This inference is significant for trade policy in India, which has fluctuated from being restrictive, very restrictive and currently liberal.; Human Capital accumulation as the source of growth and development is the major theme of the "new theory of growth" of the last decade. This dissertation recognizes the importance of human capital for the absorption of technology embodied in capital goods imports and in this respect, the contribution of human capital is included in the regression analysis on the productivity of the manufacturing sector. However, empirical evidence does not support inclusion of the human capital variable which has been proxied by primary education.