Answer:

Labour productivity is a key determinant of the growth and development of India’s manufacturing sector. Despite being labour-rich, India’s manufacturing sector contributes only about 17% to the GDP. Improved labour productivity could lead to higher output, cost efficiency, and competitiveness, contributing significantly to economic growth and employment generation.

Positive Impact of Labour Productivity on the Growth and Development of the Manufacturing 

Sector in India:

• Increased Output and Efficiency: Higher labour productivity leads to more efficient use of resources, increasing the output per worker, and reducing production costs, which enhances profitability and market competitiveness.
  For instance: The Automotive sector in India saw a 15% rise in production efficiency with automation and skill development initiatives, boosting exports.
• Enhanced Global Competitiveness: Improved labour productivity makes Indian manufacturers more competitive in the global market by enabling them to offer high-quality goods at lower prices, thereby increasing market share.
  For instance: Indian textile industry has increased its global market share by enhancing labour productivity through advanced machinery and training programs.  The textile sector contributes 14 per cent of the value-addition in the manufacturing sector.
• Promotion of Technological Adoption: Higher labour productivity often requires technological advancements, encouraging manufacturers to adopt new technologies, improving overall production processes, and quality.
  For example: The Production-Linked Incentive (PLI) Scheme in electronics has led to increased automation, improving labour productivity and product quality.
• Attraction of Foreign Direct Investment (FDI): Increased labour productivity can attract more FDI as investors seek efficient production environments, further boosting the sector’s growth and development.
  For example: Improved labour productivity in India’s pharmaceutical sector attracted substantial FDI, making it one of the largest drug producers globally.
• Boost in Employment Opportunities: Higher productivity can lead to expansion in production capacity, creating more job opportunities in both skilled and unskilled labour categories, fostering inclusive growth.
  For example: Enhanced productivity in the apparel manufacturing sector led to the creation of thousands of new jobs, especially for women.

Negative Impact of Labor Productivity on the Growth and Development of the Manufacturing Sector in India:

• Job Displacement Due to Automation: While productivity improves, increased automation can lead to job losses, particularly in sectors that rely on low-skilled labour, potentially increasing unemployment rates.
• Widening Wage Inequality: High productivity often leads to wage disparity, with a significant gap between skilled and unskilled workers, leading to social inequality and discontent.
  For example: In the IT hardware sector, increased productivity has led to higher wages for skilled workers but stagnation for less skilled labourers.
• Underutilization of Labor Force: In sectors where automation is highly prevalent, the full potential of the available labour force may not be utilised, leading to underemployment issues.
  For example: The rise of 3D printing in manufacturing reduces the need for manual labour, leaving many workers underutilised.
• Increased Pressure on SMEs: Small and Medium Enterprises (SMEs) often struggle to compete with larger firms that can afford high-productivity technologies, potentially leading to closures and market monopolisation.
  For instance: Many SMEs in the textile industry face challenges due to their inability to invest in high-cost productivity-enhancing technologies.
• Environmental Impact of Increased Production: Higher productivity often results in increased production and resource extraction, which can have negative environmental impacts if not managed sustainably.
  For example: The chemical manufacturing sector has seen environmental degradation due to increased output without adequate waste management practices.

Way Ahead:

• Enhancing Skill Development: Industry specific skill development ensures workers are well-equipped to handle advanced technologies and production processes.
  For example: The Skill India Mission aims to train over 400 million people in different skills addressing the skill gap in the manufacturing sector.
• Promoting Balanced Technological Adoption: While automation is beneficial, there should be a balanced approach that does not excessively displace labour, ensuring technological adoption supports both efficiency and employment.
  For example: MSME Technology Centers help small enterprises adopt technology while retaining a significant portion of their workforce.
• Strengthening SME Support Systems: Providing financial and technological support to SMEs will help them adapt to productivity-enhancing measures without losing their competitive edge.
  For example: The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provides collateral-free credit to SMEs.
• Fostering Inclusive Growth: Implement policies that ensure that productivity gains lead to equitable growth, with benefits reaching both skilled and unskilled workers.
  For instance: Labor welfare schemes like the Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) is a pension scheme launched by the Government of India in 2019 to provide financial security to unorganised sector workers during their old age.
• Encouraging Sustainable Practices: Aligning productivity improvements with environmental sustainability ensures that increased output does not lead to environmental degradation.
  For example: The Zero Effect Zero Defect (ZED) scheme promotes manufacturing with minimal environmental impact, encouraging sustainable practices.

To maximise the benefits of labour productivity in India’s manufacturing sector, a balanced approach that integrates skill development, technological adoption, and environmental sustainability is essential. By fostering inclusive growth and supporting SMEs, India can build a resilient manufacturing sector that leverages its vast labour pool while ensuring equitable and sustainable development for future generations.

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