Pricing power in the digital age: insights from Indian manufacturing firms 1

The rapid digitalisation of the Indian manufacturing sector over the past decade has brought forth implications for market power and public policy. Using dynamic panel models and quantile regression, this paper empirically examines the role of digitalisation in shaping firm-level absolute and relative pricing power between 2010 and 2024. The findings reveal that digitalisation significantly enhances firm-level pricing power, with the impact being stronger for firms at the lower end of the markup distribution. A firm’s relative digital adoption, compared to industry standards, also significantly influences its relative pricing power. Robustness checks using propensity score matching confirm these results. The findings carry important implications for the design and conduct of macroeconomic policy interventions.