Labour Productivity Dynamics and Determinants in India’s Manufacturing Sector

Abstract

Productivity serves as a crucial determinant of India’s developmental trajectory. Broadly defined, productivity represents the ratio of output to input, and in the context of labour, it reflects the efficiency and contribution of workers to overall production. Technological progress has played a central role in driving productivity growth and, consequently, economic development. Advances in technology enhance efficiency and output, leading to improvements in per capita income and consumption levels. Furthermore, technological change reshapes the composition and skill structure of the workforce and influences the broader socio-economic framework. According to the International Labour Organization (ILO, 2014), labour productivity is a key statistical indicator for wage determination and a fundamental factor underpinning national economic growth. It not only stimulates economic expansion but also contributes to reducing income inequality and promoting greater economic efficiency. In this study we found that labour productivity growth was faster in high capital-intensive industries and that capital deepening was a significant contributor to observed labour productivity growth in the Indian manufacturing sector.