Pushing productivity

India must address basic structural flaws

Rigidities in the labour market often tend to create friction, which can affect productivity and general economic well-being. Supported by digitisation, flexibility in hiring rules, wages, and work hours can help both businesses and workers. Studies have shown that there are benefits associated with limited work hours and flexible work schedules. These include a higher self-perceived health status among workers, lower stress levels, and increased labour productivity. When Microsoft Japan introduced a four-day work week back in 2019, it reported a 40 per cent boost in productivity. This simply means that people get more work done in less time. General productivity in India is one of the lowest in the world and improvement in this aspect can help boost economic growth.

In this context, Infosys founder N R Narayana Murthy’s suggestion for a 70-hour work week for younger people has resulted in a healthy debate and should enable all stakeholders to reassess the present condition. According to the International Labour Organization data, India’s labour productivity — economic output per hour worked — adjusted for purchasing power parity in 2021 was $8.47. The comparable number for Luxembourg was $136.45, the highest in the world, while the US was at $70.68. Also, the average work week in India is around 48 hours, higher than in affluent nations. This suggests that an average Indian worker works longer but suffers from low productivity. Increasing work hours, thus, may not raise productivity. Some states have increased work hours during the day, but kept the weekly hours capped. It is likely that some businesses may require long hours to keep the systems running, but it doesn’t necessarily call for the same workers to clock more hours per week. Firms can always adjust shifts, keeping the total weekly hours in mind.
 

A significantly higher number of work hours can not only lead to physical and mental health issues but can also push women out of the workforce. More hours at work can potentially disturb the delicate balance women maintain between work and household responsibilities, such as child rearing. Although it is true that work hours tend to go down as countries become richer, simply clocking in more hours at work may not resolve the productivity problem. The basic link between labour productivity, income, and work hours is a set of structural changes that a country needs to undertake to augment productivity levels. Besides, the adoption of technology can help raise productivity levels and drive incomes. Other measures include skilling and re-skilling the workforce. An increasing use of technology by a skilled workforce can take the overall output to a higher level in the value chain.
 

One of the biggest factors in India’s low productivity is its inability to pull out enough people from the agricultural sector, even as its share in output has declined sharply. As a result, India has not been able to expand its manufacturing base to the potential. It still has a large number of very small firms, which are not in a position to take advantage of technological development to produce at scale. Addressing some of these basic structural fault lines in the Indian economy will go a long way in boosting productivity and growth.