'ICT can have positive impact on growth'

The Reserve Bank of India is focusing on research and analysis of the productivity trends in India on a continuous basis, Y V Reddy, Reserve Bank of India governor, said.

Delivering the inaugural address at the three-day 88th annual conference of the Indian Economic Association at Andhra University here, Reddy said that productivity growth in sectors like agriculture, manufacturing and service sectors would help reduce poverty in the country.

Reddy said that the spread and the thrust of information and communication technology (ICT) provided unprecedented scope for productivity gains in all the sectors in a very short span of time all over the world, particularly in India.

"The ICT can have a positive impact on growth not only through a surge in ICT investments but also through a more productive use of the technology in the rest of the economy. The ICT helps in introducing new organisational models and other innovations in the production process besides the production of new goods and services. The total factor productivity growth (TFPG) in India declined till 1970s. The turnaround took place due to pro-business policies that were adopted during the 1980s, and trade liberalisation since 1991 that had a positive impact on the TFPG," he said.

The share of industrial sector in India's GDP is only 22 per cent whereas the service sector has emerged as the predominant contributor to GDP with a share of 58 per cent. Hence, the manufacturing sector alone may not represent a true picture of productivity of the economy as a whole, the RBI governor said.

Labour productivity growth in India in recent year is better than that in Germany, the United Kingdom and the United States though the wage rates in India are much lower as compared to Thailand, Singapore, the Philippines, Malaysia and Korea. Besides, several studies indicate that faster productivity growth leads to increased employment in the manufacturing sector, he said.

Labour force supported by adequate human capital skills and robust governance institutions can help in reaping the benefits of productivity growth on employment more rapidly, he noted.

"Productive growth has a positive impact on income growth. Sustained and high growth, in turn, are found to have reduced poverty levels in an economy, hence it is expected that productivity growth should reduce poverty in an economy," Reddy pointed out and urged the economists to take up more research to improve the productivity levels in all the sectors and assured full support of the RBI.

T S Papola, president, the Indian Economic Association, K C Reddy, chairman, Andhra Pradesh State Council for Higher Education, also spoke on the occasion.