India's labour output will still lag Asean's by '15: ILO

The Indian economy may match the economies of the Association of South East Asian Nations (Asean) in size by 2015, but in terms of labour productivity it will trail this grouping of 10 nations by a little under 20 per cent, according to a recent report by the International Labour Organisation (ILO).

The country is unlikely to match Asean productivity even after it overtakes the group in terms of size.

"If India overtook Asean around 2029, its level of labour productivity would be around a quarter of Singapore, half that of Malaysia, around 40 per cent less than Thailand and about the same level as Indonesia," said Steve Kapsos, a member of ILO's Economic and Social Affairs Unit, which drafted the report, in an e-mail response.

To be sure, the productivity gap has been steadily declining, from 70 per cent in 1990 to 33 per cent in 2006, a trend that gathered pace after the East Asian financial crisis in 1997.

"The challenge to Asean is not just that both China and India are growing faster. More importantly, their labour productivity levels are increasing more rapidly," the report said. China recently overtook Asean in terms of output per worker.

In recent times, only Myanmar and Vietnam have registered higher growth among Asean countries.

Asean countries worry that exports from China and India will flood their domestic markets, squeeze them out of global markets, and that the two giants will attract all the investment flows to Asia.

Higher-income countries, on the other hand, fear that if these large emerging economies can acquire and master new technologies, their exports may soon dominate the global high-tech export industry.

However, the report says that the two economies promise more opportunities than pose threats to Asean countries and asks the latter to tap their growing domestic markets.