A Comparative DEA-MPI Study of Financial Efficiency and Productivity in India's Cement and Steel Industries

Abstract

This paper examines and compares the financial performance efficiency of the two major industries in India i.e.; cement and steel industries using Data Envelopment Analysis (DEA) and the Malmquist Productivity Index (MPI). A panel dataset of 30 companies, comprising 15 firms from each sector over a ten-year period, was analysed to assess the efficient use of resources and productivity trends. Total assets, total equity, and operating expenses were taken as inputs, while return on assets (ROA) and net profit margin (NPM) were considered as outputs. An output-oriented DEA model under variable returns to scale (VRS) was applied to measure efficiency of the industry, and MPI was used to evaluate changes in productivity and technological progress over time. The findings indicate that both sectors operate at relatively high efficiency levels, but the steel industry demonstrates higher resource utilization and slightly stronger productivity gains, whereas the cement sector shows greater consistency but relatively smaller improvements. Malmquist index results show positive total factor productivity (TFP) growth in both sectors, with steel demonstrating slightly higher technological change, suggesting greater adaptability and innovation. The findings provide valuable insights for managers and investors on resource allocation and cost control and offer policymakers guidance on strengthening competitiveness in these capital-intensive sectors. The study also demonstrates the applicability of DEA and MPI as effective tools for multi-dimensional financial performance evaluation.