Digitalisation, Exports, and Firm Performance: A Case of Indian Manufacturing
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This study contributes to the literature on digitalisation in developing countries by examining its role in export intensity and firm productivity in Indian manufacturing from 2000 to 2021. Using fixed effects and the system generalised method of moments (GMM) model, the analysis draws on firm-level data from the Prowess database, encompassing approximately 11,000 manufacturing firms.
The findings reveal that digitalisation amongst India’s manufacturing firms is positively associated with both export intensity and productivity, after accounting for firm characteristics and heterogeneity. Specifically, a 1% increase in digital intensity corresponds to a 0.16% increase in exports. This effect is further enhanced when expenditure on internet services and software development is included, raising the export impact to 0.21% per 1% increase in digital intensity. Additionally, the results indicate that a 1% increase in digitalisation intensity leads to a 0.8% growth in total factor productivity.
These findings have significant policy implications, particularly as digitalisation increasingly shapes the global and Indian economies. They underscore the need for strategies to promote digital adoption in manufacturing to enhance competitiveness and productivity.
