BS Number Wise: India's labour, capital paradox

Productivity in agriculture and eight other sectors is increasing but employment is falling and there is no significant capital investment

In 1954, Professor Arthur Lewis presented a model to explain economic development in developing countries. When few cared about them, Lewis posited there was surplus labour in agriculture in developing countries. As these economies shifted gears, labour would move from agriculture to manufacturing. Agriculture labour productivity would improve and eventually, wages would increase in agriculture and fall in manufacturing, bringing parity.

Despite criticisms and unrealistic assumptions, Singapore proved to be a successful example of the Lewis model. India is bolstering Lewis’s argument about labour productivity.

Employment in Indian agriculture is falling, and labour productivity is rising. The improved productivity comes