Low labour productivity harming manufacturing in India: Boston Consulting Group

While government needs to invest in training, manufacturing companies should look inward to give more importance to training

Bs_logo
Shanu Athiparambath New Delhi
Last Updated : Mar 14 2013 | 8:28 PM IST
At a time when manufacturing grew 0.9% in the first ten months of the current fiscal, Boston Consulting Group (BCG) today said the rate must rise to 14% to meet the goal of National Manufacturing Policy (NMP).

The policy aims to increase the share of manufacturing in India's GDP from around 15% at present to 25% over a decade.

In a report on Indian manufacturing competitiveness, released today, BCG blamed poor labour productivity for low manufacturing growth.

Also Read

“The Indian manufacturing sector has a low share in India’s GDP; quite lower than its peers. There is a low preference for manufacturing sector among job seekers. India’s manufacturing sector is growing at one of the lower rates, unable to keep pace with inflation and labour costs, when the services sector has improved its GDP share with its focus on training and productivity”, the report said.

Labour productivity and global GDP share go hand-in hand, the report said. According to the report, though India has a young and booming demography, and labor cost competitiveness, the labour productivity in India is lower ($3,000 per employee a year) than that of developed nations or even other BRICS nations. In United States, the labour productivity is $1, 55,000 per employee a year, and in Japan it is $1, 04,000.

The report said that while the government needs to invest in training, manufacturing companies should look inward to give more importance to training.

“Raising the manufacturing sector share of the GDP from 15% to 25% will only happen with an increase in labour productivity. Low labour cost alone will not do. China if you look at the last 10 years, the labour cost has increased by 10-15%. But, the productivity has increased by over 15%.”, said Arvind Pandey, the partner and director of the Boston Consulting Group, India.  

In January, the Index of Industrial production had registered a growth of 2.4% with the manufacturing sector growing at 2.7%.
Subscribe to Business Standard digital and get complimentary access to The New York Times

Smart Quarterly

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

SAVE 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

First Published: Mar 14 2013 | 8:26 PM IST