Overview
Labour Productivity on the Rise
Labour productivity in India’s manufacturing sector has seen a sharp improvement. Between FY20 and FY24, productivity growth nearly doubled to 6%, compared to 3.4% during FY15–FY19.
Out of 20 major states, 14 states reported productivity improvements. States such as Bihar, Assam, Kerala, and Andhra Pradesh recorded double-digit gains in the range of 11–17%. This highlights the widespread impact of efficiency reforms across the country.
Wage Growth Challenges
While productivity has surged, wage growth remains a concern. During FY20–FY24, nominal wage growth averaged only 5.2% annually — the lowest since FY00–FY04. In terms of real wages, growth slipped to just 0.5%.
The average monthly wage in manufacturing rose to Rs 16,135 during FY20–FY24, compared to Rs 8,151 in FY10–FY14. Although wages have increased in absolute terms, the pace of growth has slowed, raising questions about income distribution and workforce well-being.
Role of GST and Policy Reforms
The introduction of the Goods and Services Tax (GST) has been a game-changer for manufacturing. It has helped streamline supply chains, reduce logistics costs, and improve operational efficiency across industries. In addition, cleaner corporate and banking balance sheets have supported stronger investment activity.
Government policy interventions and an accelerated adoption of digital technologies have also played a crucial role in enhancing manufacturing efficiency. Despite disruptions caused by the COVID-19 pandemic and global supply chain shocks, the sector has demonstrated resilience.
Future Outlook
India’s manufacturing sector is well-positioned to benefit from structural reforms, better logistics, and digital transformation. However, wage stagnation and income inequality may pose challenges that policymakers and businesses need to address. If balanced correctly, the sector could continue to be a strong engine of economic growth and job creation in the coming years.
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