Answer: 

Introduction:

The four key elements for producing goods and services in an economy are labour, capital, natural resources, and entrepreneurship. According to the International Labour Organisation (ILO), labour productivity represents the total volume of output (measured in terms of Gross Domestic Product, GDP) produced per unit of labour (measured in terms of the number of employed persons or hours worked) during a given time reference period. It is an indicator of the efficiency of a country’s workforce.

Body:

It is said that economic growth in the recent past has been led by an increase in labour productivity. This is because:

• Jobless growth: Okun’s Law states that greater growth results in lower unemployment. But in India the rate of unemployment has been higher. So, growth is due to increased productivity of existing labour rather than addition of new labour.
• LPG reforms: Labour productivity has increased post 1991 reforms due to technological progress, improved education and training, and the adoption of best practices and innovative business models.
• Service sector: The share of the services sector to India’s GDP has increased to 55% while it employs only about 30% of the workforce. This is because of higher labour productivity.
• Agriculture: The decline in share of the workforce from 58% to 45% in the last decade has not led to a decline in share of the agricultural sector to India’s GDP (around 17%). This means the labour is now more efficient.
• Increased productivity in Rural India: The contribution of rural areas to manufacturing output has doubled from 25% (1970-71) to 50% (2011-12). However, between 2005-12, rural India witnessed a negative employment growth rate of -2.8%.
• Pandemic, digital and remote working: Prevalence of work-from-home since the onset of the Covid-19 pandemic has allowed people to dedicate more time, resulting in higher labour productivity in sectors such as ed-tech and other digitally driven fields.

Growth pattern that will lead to creation of more jobs without compromising labour productivity.

• Promotion of non-farm employment, such as in the food processing industry.
• Focus on Labour Intensive Industries such as Textile and Leather.
  • Special programmes are required to create jobs in labour-intensive industries.
• Integrate “Assemble in India for the world” into Make in India to create 4 crore well-paid jobs by 2025 (Eco Survey 2018-19)
• Incentivizing ‘infant’ MSME firms rather than dwarf firms wherein incentives should be limited to initial 5-7 years only. (Eco Survey 2019-20)
  • Cluster formation in MSMEs leads to more job creation.
• SEZs as EEE’s: Change in Orientation of SEZs as 3 E’s- Employment and Economic Enclaves to boost employment creation. (Baba Kalyani Committee)
• Coordinate urban development with manufacturing clusters: Infrastructure investment creates jobs as well as opportunities for further development by the private sector.
• Effective Implementation of Labour Reforms, especially the Labour codes, will create more opportunities for employment.
• Investment in public health and skilling: Industry and public institutions must put in coordinated efforts to this end. Upskilling can go a long way in increasing employment without compromising on productivity.

Conclusion:

The above strategies would enable India to create more jobs and reap its favourable demographic dividend. At the same time, they do not adversely affect labour productivity and hence would enable India to become an economic powerhouse sooner.

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