Skip to main content

India would need to double falling labour productivity to reach 9% GDP growth: An "unlikely" proposition

Per person labour productivity in US$ (2014 prices)
By Our Representative
India Ratings and Research (Ind-Ra), an associate of the New York-based Fitch Group, has suggested that India’s Gross National Product (GDP) growth is unlikely to grow by 9%, as predicted by the Government of India, because labour productivity of late has been progressively going down, with no signs of improvement.
Indicating that there is a direct link between GDP growth and labour productivity, Ind-Ra says, “India will have to raise its labour productivity growth to 7.3% (73.8% year on year) to attain the GDP growth of 9.0%.”
As against the required growth of 7.3%, the rating agency has said in a research paper, titled “Skill India to Improve Labout Productivity", “India’s labour productivity grew 4.2% in FY15, and to attain the double-digit growth of 10%, labour productivity growth will have to be nearly doubled to 8.3%.”
Pointing towards how “labour productivity has fallen lately”, the paper says, “India’s labour productivity grew at an average annual rate of 5.52% during the decade of 2000s as against 3.05% during 1990s.”
Pointing towards the fall in labour productivity, the paper says, “The labour productivity picked up, In fact, during the high growth phase of FY05-FY08, it grew at 9.00%.” Thereafter, India has been “facing a productivity imperative with average labour productivity falling to 3.84% during FY11-FY15.”
Per person labour productivity in US$ (2014 prices)

Sector-wise breakup

Giving sector-wise breakup labour productivity growth during FY00-FY13, Ind-Ra says, for electricity, gas, and water supply it was 8%, for transport, storage, and communications 7%, for manufacturing 6.4%, and community, social, and personal services 6.
Pointing out that “construction, agriculture and mining recorded labour productivity growth of negative 1.0%, 2.4% and 4.7%, respectively”, Ind-Ra says, compared to India, “China maintained labour productivity growth in the range of 6.6%-8.4% during FY00- FY13 across various sectors, which is both higher and more uniform across the sectors.”
In value terms, Ind-Ra says, China’s labour productivity was double that of India in FY 2015. “In FY15, India’s labour productivity per person employed was USD13,637 as against China’s USD23,089”, it points out.
The rating firm believes, even the financial year FY2016 there would be a “continuation of the low labour productivity trends, posing concern for economic growth, market expansion, profit growth, and societal welfare.”
It adds, “Longer and sustainable labour productivity growth critically depends on how much businesses invest in innovation, knowledge, and intangible capital, and how committed governments are to structural reforms.”
Insisting that the Modi government go in for structural reforms urgently, the paper says, “Sooner the policy issues relating to land acquisition, goods and services tax and labour market reform are settled, the better it is for economic growth.”
The paper says, “Much of India’s productivity gains during 2000s did not come from a shift of workers from the lower-productivity agriculture to other sectors, but from productivity gains within the sectors.”
For example, it says, “While the share of manufacturing sector in the total employment remained nearly unchanged between FY94-FY10, the sector’s labour productivity went up from negative 1.4% during 1990s to 6.4% for FY00-FY13.”
Dispelling the view that higher labour productivity would mean lower employment, the paper says, “An additional 63.4 million jobs (labour productivity growth: 5.29%) were created between FY00-FY10 compared to 22.3 million jobs (3.84%) between FY94-FY00.”
It adds, “The share of jobs in agriculture in national employment declined by 7% between FY00-FY10 and construction sector largely filled the gap.”

Comments

TRENDING

India under Modi among top 10 autocratizing nations, on verge of 'losing' democracy status

By Rajiv Shah
A new report, prepared by a top Swedish institute studying liberal democracy, has observed that there has been a sharp “dive in press freedom along with increasing repression of civil society in India associated with the current Hindu-nationalist regime of Prime Minister Narendra Modi.” The report places India among the top 10 countries that “have autocratized the most”. Other countries that have been identified for rolling towards autocracy are -- Hungary, Turkey, Poland, Serbia, Brazil, Mali, Thailand, Nicaragua and Zambia.

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam*
RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Gujarat link of controversial US doctor who 'forced' WHO quiz Trump's wonder drug

By Rajiv Shah
A top American doctor, Sapan Sharankishor Desai, born and raised in the “affluent” North Shore (Chicago) region of Illinois by Indian parents, at one point of time involved in NGO activity through  dedicated to “improving” the lives of the impoverished in Gujarat, is in the eyes of a major international storm following his paper (retracted) in a “Lancet” questioning Donald Trump-promoted drug hydroxychloroquine.

Border conflict? RBI nod India's 'brotherly' help to China internationalise its currency

By Bhabani Shankar Nayak*
In the middle of a global pandemic, China started an unprovoked border conflict with India. It unraveled trust deficit and ties between the two neighbours. As thousands of Chinese troops tried occupying Indian territory, the Narendra Modi-led BJP government directs the Reserve Bank of India (RBI) to allow the Bank of China to start regular banking services in India. The Bank of China will now operate in India like any other commercial banks.

Dalits in India, Blacks in US suffer 'similar' humiliation: Macwan drafts letter to Trump

Counterview Desk
Well-known human rights activist Martin Macwan, recipient of the prestigious Robert F Kennedy Human Rights Award in 2000, has drafted an open letter to US President Donald Trump following the disturbing turn of events with the murder of George Floyd, leading to widespread protests in the US. He has sought signatures of concerned citizens before sending it to Trump.

RSS supremo Deoras 'supported' Emergency, but Indira, Sanjay Gandhi 'didn't respond'

By Shamsul Islam*
National Emergency was imposed on the country by then Prime Minister Indira Gandhi on June 25-26, 1975, and it lasted for 19 months. This period is considered as ''dark times' for Indian democratic polity. Indira Gandhi claimed that due to Jaiprakash Narayan's call to the armed forces to disobey the 'illegal' orders of Congress rulers had created a situation of anarchy and there was danger to the existence of Indian Republic so there was no alternative but to impose Emergency under article 352 of the Constitution.

Clean chit to British rulers, Muslim League? Karnataka to have Veer Savarkar flyovers

By Shamsul Islam*
The BJP government of Karnataka led by BS Yediyurappa is going to honour Hindutva icon VD Savarkar by naming two of the newly built major flyovers in Bangalore and Mangalore after him. There was a huge uproar against this decision of the RSS-BJP government as many pro-Kannada organisations with opposition parties and liberal-secular organizations questioned the logic to ignore so many freedom fighters, social reformers and others from within the state.

Hurried nod to Western Ghat projects: 16 lakh Goans' water security 'jeopardised'

Counterview Desk
Taking strong exception to "virtual clearances" to eco-sensitive projects in the Western Ghats, the National Alliance of People’s Movements (NAPM) in a statement has said urged for a review of the four-lane highway, 400 KV transmission line and double tracking of the railway line through the Bhagwan Mahavir Wildlife Sanctuary and Mollem National Park in Goa.

Disturbing signal? Reliance 'shifting focus' away from Indian petrochemical sector

By NS Venkataraman*
Reliance Industries Ltd (RIL), a large Indian company, has expanded and grown in a spectacular manner during the last few decades, like of which no industrial group in India has performed before. RIL is now involved in multi various activities relating to petroleum refineries, petrochemicals, oil and gas exploration, coal bed methane, life sciences, retail business, communication network, (Jio platform) media/entertainment etc.