{"id":229464,"date":"2023-03-02T19:49:21","date_gmt":"2023-03-02T14:19:21","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=229464"},"modified":"2023-03-02T19:49:21","modified_gmt":"2023-03-02T14:19:21","slug":"the-country-must-work-at-raising-productivity-growth","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-country-must-work-at-raising-productivity-growth\/","title":{"rendered":"The country must work at raising productivity growth"},"content":{"rendered":"\n

Source<\/strong>– The post is based on the article \u201cThe country must work at raising productivity growth\u201d <\/strong>published in the mint <\/strong>on 2nd March 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS3- Indian economy and growth<\/p>\n

Relevance:<\/strong> Factors impacting growth of Indian economy<\/p>\n

News- <\/strong>The recent budgets have hiked capital expenditure substantially but there is less focus on improving productivity of the economy.<\/p>\n

What is the rationale behind substantially hiked capital expenditure in recent budgets?<\/strong><\/h2>\n

The reason is multiplier effects of capex<\/strong>. It is assumed that increased capex would lead to higher growth in future<\/strong>, as these investments could enhance capital formation.<\/strong><\/p>\n

Prospects of higher growth might also attract more private investments.<\/strong><\/p>\n

However, such a growth strategy fails to realise its full potential unless there is corresponding increases in productivity. <\/strong><\/p>\n

Why is productivity an issue for the Indian economy?<\/strong><\/h2>\n

A recent study published in January\u2019s RBI Bulletin<\/strong> shows the existence of large productivity differences across sectors. <\/strong><\/p>\n

The study examined the time span between 2001 and 2019<\/strong> and divided it into two sub-periods<\/strong>, 2001-10 and 2011-19.<\/p>\n

RBI study offers disaggregated economy-wide estimates <\/strong>in the manufacturing sector. Wide variations <\/strong>are found in productivity growth across sectors.<\/p>\n

The sectors crucial in accelerating industrial growth<\/strong>, such as electrical equipment, refined petroleum, machinery and chemicals, witnessed a productivity decline <\/strong>in the second time period, compared to the first.<\/p>\n

The sectors with lower share in overall value addition<\/strong>, such recycling, have registered higher productivity<\/strong> growth since 2010.<\/p>\n

Two important inferences can be made from the figures. First, capital-intensive sectors<\/strong> saw a decline in productivity growth. Labour-intensive sectors<\/strong>, barring transport equipment and parts had higher productivity.<\/p>\n

The RBI study\u2019s findings are in line with a 2021 World Bank report<\/strong>. It observed that the level of productivity in the South Asia Region(SAR)\u00a0 remains the lowest among emerging market and developing Economies regions.<\/strong><\/p>\n

The World Bank report argues that the average level of labour productivity<\/strong> in SAR during 2013-18 was only 5% of the advanced economy average<\/strong>.<\/p>\n

However, it should be noted that within South Asia, India stands out with higher growth of productivity.<\/p>\n

What is the way forward to increase the productivity of the Indian economy?<\/strong><\/h2>\n

There is a need to enhance investments to strengthen human capital<\/strong>. The economy has already achieved outcomes in terms of raising life expectancy, reducing mortality, and expanding access to education.<\/p>\n

The investments in physical infrastructure<\/strong> needs to be complemented with commensurate human capital improvements<\/strong>.<\/p>\n

This involves a two-pronged approach<\/strong>. First, provide more capital access<\/strong> to factors that contribute to human capital formation <\/strong>and ensure that these are inclusive. Second, we must ensure continuous quality improvements<\/strong> in human capital.<\/p>\n

Resource reallocation<\/strong> was the driver of aggregate productivity during 2001-10. Productivity can be raised by sectoral reallocation of resources from low to more productive sectors<\/strong>. It should be accompanied by improved local services and urban planning.<\/strong><\/p>\n

There is a need for renewed effort to promote the reallocation of capital and labour<\/strong> to more productive firms within sectors.<\/p>\n

Productivity-enhancing inter-firm resource reallocation<\/strong> can be encouraged by policies to foster competition<\/strong> and by reducing regulatory burdens<\/strong> that discourage firm growth. This requires continued reforms.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source– The post is based on the article \u201cThe country must work at raising productivity growth\u201d published in the mint on 2nd March 2023. Syllabus: GS3- Indian economy and growth Relevance: Factors impacting growth of Indian economy News- The recent budgets have hiked capital expenditure substantially but there is less focus on improving productivity of… Continue reading The country must work at raising productivity growth<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,11126],"class_list":["post-229464","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-the-mint","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704937702},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/229464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=229464"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/229464\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=229464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=229464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=229464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}