This paper endeavored to examine the production structure and technical efficiency in Indian pharmaceutical industry during 1974-75 to 2011-12. In view of achieving the above objective, data was culled out from the various reports of the Annual Survey of Industries and Handbook of Statistics. For analysis purpose, the stochastic frontier approach was used to estimate the production function and the time varying technical efficiency in the Indian pharmaceutical industry. The empirical analysis based on the econometric technique showed that the Cobb-Douglas production function with Hicks-neutral technical progress was not appropriate in case of the Indian pharmaceutical industry. Therefore, it was observed that the translog production function with capital using non-neutral technological progress represented the technological relationship in the Indian pharmaceutical industry. Moreover, the time-variant prediction of technical efficiency at constant returns to scale, at varying returns to scale, and scale efficiency in the Indian pharmaceutical industry during the study period revealed that the average technical efficiency at constant returns to scale for the Indian pharmaceutical industry during the entire period turned out be 0.995 and it implied that the Indian pharmaceutical industry had realized about 99.5% of its technical abilities. Thus, there were very less variations in the technical efficiency in the Indian pharmaceutical industry and showed the stable trends throughout the study period.

1. Ahluwalia, I.J. (1991). Productivity and growth in Indian manufacturing. New Delhi : Oxford University Press.
2. Aigner, D.J., Lovell, C.A.K., & Schmidt, P. (1977). Formulation and estimation of stochastic production frontier production function models. Journal of Econometrics, 6 (1), 21 - 37.
3. Austria, M.S., & Martin, W. (1995). Macroeconomic instability and growth in Philippines, 1950 - 1987 : A dynamic approach. The Singapore Economic Review, 40 (1), 65- 81.
4. Battese, G.E., & Coelli, T.J. (1992). A model for technical inefficiency effects in a stochastic production function for panel data. Empirical Economics, 20 (1), 325 - 332.
5. Bhullar, A., & Singh, P. (2017). Economic efficiency and growth sustainability of Indian small scale industries: A pre and post-liberalization based comparative analysis. Arthshastra Indian Journal of Economics and Research, 6 (4), 7-22. doi:10.17010/aijer/2017/v6i4/118154
6. Christensen, L.R., Jorgenson, D.W, & Lau. L.J. (1973). Transcendental logarithmic production frontiers. Review of Economics and Statistics, 55 (1), 29 - 45.
7. Farrell, M. J. (1957).The measurement of productive efficiency. Journal of Royal Statistical Society Series, A 120, 253 - 281.
8. Gandhimathy, B. (2013). An economic analysis of production of industrial cooperatives in Tamil Nadu : The stochastic production function model. Arthshastra Indian Journal of Economics and Research, 2(6), 40 - 46. DOI: 10.17010/aijer/2013/v2i6/54539
9. Goldar, B. (1985). Productivity trends in Indian manufacturing industry : 1951-1978. Indian Economic Review, 18 (1), 73 - 99.
10. Greene, W. (1997). Frontier production function. In, M. H. Pesaran & P. Shmidt. (ed.), Handbook of applied econometrics, Vol II: Microeconometrics. Oxford : Blackwell Publishers Ltd.
11. Hausman, J.A., & Taylor, W.E. (1981). Panel data and unobservable individual effects. Econometrica, 49(6), 1377- 1398.
12. Kumar, S. (2001). Productivity and factor substitution: Theory and analysis. New Delhi : Deep and Deep Publications Pvt. Ltd.
13. Kumar, S. (2003). Inter-temporal and inter-state comparison of total factor productivity in Indian manufacturing sector: An integrated growth accounting approach. ArthaVijnana, 45(3- 4), 161 - 184.
14. Kumar, S. (2006). A decomposition of total factor productivity growth: A regional analysis Indian industrial manufacturing growth. International Journal of Productivity and Performance Management, 55 (4), 311 - 331.
15. Kumbhakar, S.C. (1990). The specification of technical and allocative inefficiency in stochastic production and profit frontiers. Journal of Econometrics, 34(3), 335 - 348.
16. Majumder, S. (2010). ASI database & firm level technical efficiency: The case of Indian chemical sector. Arthaniti, 9(1- 2), 34-59.
17. Martin, W., & Warr, G. (1990). The declining economic importance of agriculture. Invited Paper to the 34th Annual Conference of the Australian Agricultural Economic Society, Brisbane, February 12-15, 1990.
18. Neogi, C. (2012). Identification of factors behind performance of pharmaceutical industries in India (Discussion Paper Series). Japan : Kobe University.
19. Neogi, C., & Ghosh, B. (1994). International efficiency variations in India manufacturing industries. The Journal of Productivity Analysis, 5 (3), 301- 324.
20. Pannu. (2011). Efficiency and productivity analysis of Indian pharmaceutical industry using data envelopment analysis. International Journal of Operational Research, 10(1), 121-136. DOI : <a href=http://dx.doi.org/10.1504/IJOR.2011.037266 target="_blank">http://dx.doi.org/10.1504/IJOR.2011.037266</a>
21. Ray, S. (2002). Economic reforms and efficiency of firms: The Indian manufacturing sector during the nineties. Delhi : Institute of Economic Growth, University of Delhi.
22. Singh, J., & Singh, P. (2014). Decomposition of technical efficiency and productivity growth of Indian pharmaceutical industry: A non-parametric analysis. Arthavijnana, LVI (4), 456 - 478.