India’s labour productivity between 2016 and 2018 grew by just 3.7 per cent — a far cry from the annual growth of 14 per cent between 2004 and 2008
An analysis done by India Ratings and Research of Annual Survey of Industries data on India’s labour productivity growth in the organised manufacturing sector shows a disappointing trend.
During the high economic growth phase between 2004 and 2008 (just before the global financial crisis hit), India’s labour productivity grew by over 14 per cent every year. But between financial years of 2011 and 2015, this rate fell to just half of that (7.4 per cent) and continued its deceleration to just 3.7 per cent between financial years of 2016 and 2018.
What is labour productivity and why does it matter?
Broadly speaking, productivity is a measure of the efficiency with which resources, both human and material, are converted into goods and services. Besides land and capital, labour productivity plays a crucial role in deciding the rate of economic growth. Indeed, India Ratings report points out that globally labour productivity growth alone accounted for about two-thirds of the gross domestic product (GDP) growth during FY01-FY10, leaving only one-third to labour/employment growth.
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