On Labour Productivity in India- NRN Gets It Wrong

Source: The post on labour productivity in India is based on the article “NRN Gets It Wrong- Working long hours doesn’t increase productivity” published in “The Times of India” on 28th October 2023.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Employment and labour productivity.

News: The article discusses India’s low productivity as highlighted by Narayana Murthy. Despite Indians working about 48 hours weekly, their hourly output is low. The author also highlights how productivity isn’t just about hours but also technology and education.

What is productivity? 

Productivity measures how efficiently inputs like labor and capital are used to produce outputs, such as goods and services. On a country level, it affects living standards and economic growth.

What are the different kinds of productivity?

Labor Productivity: Measures the output produced per hour of work. For example, for a GDP of $1 trillion with its people working 20 billion hours, the labor productivity is $50 per hour.
It is directly linked to increased wages, better living standards, and consumers’ purchasing power.

Capital Productivity: Assesses output generated by using physical assets like machinery, buildings, and equipment.
It indicates how efficiently investments in physical assets are used, impacting profitability and competitiveness.

Total Factor Productivity (TFP): Accounts for growth in output not explained by labor or capital alone, often termed as “innovation-led growth”.
It reflects efficiency improvements, technological progress, and innovation in an economy.

What is current labor productivity in India? 

Working Duration: Indians average almost 48 hours a week, one of the highest globally.

Hourly Output: India’s productivity rate is $8.47 per hour, despite the long work hours.

In comparison, Countries like France work fewer hours (about 30 weekly) but achieve higher productivity ($58.5 per hour).

What influences productivity? 

1) Role of Technology: The level of technological diffusion in an economy positively impacts productivity.

2) Human Capital: The quality of human capital, or education and skills, directly relates to productivity. A well-educated workforce can produce more in less time.

3) Impact of Agriculture: A significant portion of the workforce in agriculture can lower a country’s overall productivity.

Question for practice:

Evaluate how India’s working-hours and technology-adoption impact productivity compared to countries like France.