This paper provides an estimate of the production cost of losses in official working
hours and of utilization-adjusted productivity growth using robust methods on a panel of
industry-region data for Indian manufacturing in the 1980s. Time losses such as arise on
account of power cuts and materials shortages appear to have cost the economy a sixth of
its potential manufacturing output in 1979. Concomitant with deregulation and increased
public investment in infrastructure in the 1980s, there was a significant recuperation of lost
time. Although this contributed 25% of the observed acceleration in output, it has escaped
notice so far. Recognizing the increase in factor utilization produces more modest estimates
of productivity growth and casts doubt on its sustainability. q 1998 Elsevier Science B.V.
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