Machine Tool Absorption and Capital Formation in India

This paper attempts to trace the evolution of the machine tool industry in India. It tests whether the relationship between gross fixed capital formation and machine tool supply has remained the same before and after 1991. It also seeks to demonstrate that any short-run deviations of machine tool supply from the demand warranted by GFCF are self correcting. Yet another objective of the exercise is to test and quantify an error correction model between machine tool supply and gross fixed capital formation.