Labour productivity shrank in 9 industries during FY23: RBI's KLEMS data

Eight of these nine industries belong to the manufacturing sector

As many as nine out of 27 industries saw their labour productivity contract in FY23 compared to the preceding year, with eight of these industries belonging to the manufacturing sector, thus highlighting India’s lack of competitiveness in industrial sectors, an analysis of the latest KLEMS (Capital, Labour, Energy, Material and Service) database released by the Reserve Bank of India (RBI) showed.

Labour productivity is an important metric in an economy as it measures the efficiency with which inputs are used to produce goods and services, and it offers a measure of economic growth, competitiveness, and living standards within a country.

The data shows that textiles, leather & footwear industry saw the highest contraction (-14.2 per cent) in labour productivity. This was followed by chemical products industry (-12 per cent), rubber & plastic products industry (-11.8 per cent), electrical equipment industry (-7.1 per cent), and manufacturing & recycling industry (-5.8 per cent).

On the other hand, hotels & restaurant industry (35 per cent) saw the highest increase in labour productivity during FY23, followed by coke, refined & petroleum products (16 per cent) and posts & telecommunication (15 per cent).

Besides, the data also shows that 11 out of 27 industries also saw a contraction in the labour quality during FY23, with rubber & plastic products industry (-5 per cent) seeing the highest slide, followed by chemical products industry (-4.4 per cent) and printing & publishing industry (-2.9 per cent).

Rituparna Chakraborty, co-founder, Teamlease Services, said that the decline in labour productivity is a direct fallout from the fall that has been seen in labour quality over the years, as a result of the dysfunctional ecosystem of education, skilling and employability that currently exists.

“India has always had one of the lowest labour productivity around the world and the opportunity that presents itself today to attract foreign investment is being slowly squandered due to the lower labour productivity. It is not just about working longer hours, skilling plays a very important role in one's ability to complete the task. This data should ring some bells among policymakers as the government should increase investment focus on education, health and skilling of workers,” she added.

Labour productivity was even worse during the Covid-hit FY21, when 17 out of 27 industries had seen labour productivity contract, followed by 11 industries seeing contraction in productivity during FY22 as well.

The database released last week showed that the total number of employed people as a ratio of the total population increased to 44.2 per cent in FY24 from 34.7 per cent in FY18, with the workforce growing by 168 million to 643.3 million during the period.