Impact of Labour, Cost of Capital, and Output on the Average Cost of Indian Textile Industry: A Trend Analysis

Authors- Ashita Katiyar, Shivam Kumar Singh

Abstract-The paper determines the average cost function in linear form to examine the cost structure of the textile sector. According to the research, the base level of cost when all other elements are held constant is indicated by the intercept of the linear average cost function, which has a positive value of 0.089 crore and is statistically significant. The average cost and output are found to be significantly inversely correlated by the research, with an output coefficient of -2.53. This indicates that the industry’s economies of scale are highlighted, with an increase in output of one unit leading to a 2.53 unit decrease in average cost. The average cost is also significantly influenced by labour and capital costs. The labour cost has a statistically significant coefficient of 0.0061, whereas the capital cost has a statistically significant coefficient of 0.01598. These coefficients demonstrate how the costs of the textile sector are sensitive to variations in input prices, showing that rises in labour and capital prices result in higher average costs. The strong goodness of fit of the model is demonstrated by an R-square value of 0.914 and a significant F statistic. This high R-square value indicates that differences in labour, capital, and production may account for 91.4% of the variation in the average cost of textiles. Additional research examines the connections among labour cost, capital cost, and production by examining the average cost of the industry. With the goal of helping industry stakeholders maximise production efficiency and cost control, the findings offer a thorough understanding of how these variables interact to affect the textile sector’s entire cost structure.

DOI: /10.61463/ijset.vol.12.issue3.184