India must lift labour productivity to reach Viksit Bharat goal: Suman Bery

NITI Aayog's Suman Bery says India must boost labour productivity, deepen investment, raise women's participation and leverage AI to reach per capita income levels required for Viksit Bharat 2047

India needs to significantly improve its labour productivity to raise its per capita income to around $18,000 to achieve the goal of Viksit Bharat by 2047, NITI Aayog Vice Chairman Suman Bery said at the Business Standard Manthan Summit on Tuesday.

 

In a fireside chat with A K Bhattacharya, Bery said that while India’s labour productivity story is not bad, it has been eclipsed by what China has achieved. He stated that India’s labour productivity story has been overshadowed by the China story and that India could replicate the neighbouring country’s method of maintaining a one-for-one correlation between real per capita income and labour force productivity, measured at purchasing power parity. 

 

“If Viksit Bharat is to involve improvements in living standards, there needs to be a direct correlation between per capita income, living standards and labour productivity. The challenge is to induct all these people into the labour force while not having them depress labour productivity,” Bery said. 

Leveraging India’s demographic dividend needs to be linked with the productivity agenda, Bery added.

 

“If we want to get to $18,000 real per capita income by 2047, our labour productivity has to go up from where it is right now at around $3,000 or just under that. So that's the magnitude of what we need to aim for,” Bery said. 

Under the government’s Viksit Bharat vision, the country is aiming for per capita income levels between $15,000 and $18,000. As of 2024, this number stood at $2,694.7 for India, according to the World Bank.

 

Bery said there may be a need to rebrand NITI Aayog as a “Productivity Commission”, similar to one that exists in Australia. “We can’t have a modern society without a more affluent economy than what we have right now.”

 

He said that although the Planning Commission earlier used to build road maps in five-year gaps, the idea of looking forward 25 years is unprecedented in India.

 

The Planning Commission followed five-year planning cycles before being replaced in 2015 by the NITI Aayog. The Viksit Bharat 2047 framework represents a 25-year structural transformation road map rather than incremental planning.

 

“There is a fundamental difference, both politically and technocratically, in thinking ahead 25 years as compared with five years,” he said.

 

Bery also spoke about a gap in labour force participation between men and women, calling for a need to leverage the available female workforce.

 

“What has been idiosyncratic about India is that we have had very different male versus female labour force participation rates,” Bery said. 

India has a female workforce of 183 million people and an out-of-workforce population of 264 million women, Bery said. There is a need to increase women’s participation and deal with the barriers they face when entering the labour market, he added. 

According to data from the World Bank, India’s female labour force participation rate was 33.23 per cent in 2023, while the same number for males stood at 80.9 per cent. 

“The increase in the female labour force participation rate has been encouraging, as we have seen from the PLFS (Periodic Labour Force Survey) data. We must keep mobilising this large reservoir of often-skilled women and address the barriers such as social barriers or childcare barriers. This could be a big accelerator,” he said.

 

Bery also highlighted the need for an increase in investment rates in India. 

“If we are going to have more rapid growth in the working-age population, we will have to supply them with capital, so that there’s no capital shallowing but capital deepening, which will require an increase in the investment rate,” he said.

 

He added that private investment has not grown as the economy still remains in the aftermath of the global financial crisis of 2008. 

“I don’t think we quite appreciate how much scarring there was in the private sector with the global financial crisis. So that’s one reason why investment rates are going to have to go up,” he said. 

Additionally, for India to lower its carbon footprint, industries would have to involve spending on capital expenditure and not operating expenditure as they pass through the phase of energy transition.

 

“We’ve got to raise our investment rate by 2 or 3 percentage points of gross domestic product,” he added.

 

Speaking about utilising workforce skills, Bery said that apart from increasing domestic participation, international worker mobility also needs to be leveraged.

 

“Although frankly quite how receptive the rich world is going to be towards Indian migrants remains to be seen,” he added.

 

Bery insisted that artificial intelligence (AI) provides opportunities for India, and not just challenges. “The scythe of AI is probably more likely to affect advanced countries’ labour markets before it is going to affect us,” he added.

 

Agreeing with development economist Arthur Lewis’s views, he said there may be a need to re-examine where entry points lie for unskilled workers in the labour market. The earlier view was that the scope for such workers lies largely in the manufacturing sector, but the services sector may be emerging as the new entry point, said Bery.

 

However, Bery added that accelerating productivity in the services sector is not easy, as compared to the manufacturing and agriculture sectors. 

Agriculture employed 46.1 per cent of the workforce but produced only 14.7 per cent of gross value added (GVA), according to the Periodic Labour Force Survey (PLFS) 2023-24. Services generated 54.6 per cent of GVA with just 29.7 per cent of employment, while industry accounted for 30.8 per cent of GVA with 24.1 per cent of jobs, showed data from the Ministry of Statistics and Programme Implementation’s National Accounts Statistics 2025.

 

To accelerate productivity in the services sector, policymakers would need to look at individual states, Bery said, adding that the new labour codes provide a lot more flexibility in this regard.

 

The four labour codes — on wages, industrial relations, social security, and occupational safety — aim to simplify compliance and provide greater flexibility in hiring and restructuring, though implementation remains staggered across states.

 

Bery pointed to the need to reorient India’s higher education system to focus less on government employment and civil services examinations. There needs to be more prominence given to training for life, instead of training for examinations, said Bery, citing examples from the United States’ education system.