Interstate Variation of the Growth Process of Indian Pharmaceutical Industry: Evidence from Structural Break Unit Root Test

Abstract

This paper identifies whether there has been a change in the level or growth or both in the level as well as growth of output of 17 major states of India and in the All India level in Pharmaceutical Industry in the post liberalization period since 1991-92 using recent advancement of structural break analysis of modern time series econometrics by using the data on gross value added for the period 1983-84 to 2007-08 and tested for exogenous structural break in the level, growth and both in the series of output of Pharmaceutical industry in the 17 major states as well as in All India level. This paper concludes that for the states like Andhra Pradesh, Gujarat, Haryana, Maharashtra and Rajasthan the underlying process is TS for the Model A and Model B supporting the evidence of deterministic trend but no statistical evidence of one time structural break is found. In case of Karnataka, there exists onetime exogenous structural break in Model B only. For Madhya Pradesh, there exists one time exogenous structural break in Model A only. For the states like Assam, Punjab, Tamilnadu and West Bengal, all the three models are TS supporting the evidence of deterministic trend. In case of West Bengal only, there is statistical evidence of structural change after 1991-92 and also the evidence of one time structural break in the level, growth and both in the level and growth of the series of output of Pharmaceutical industry.