MPFD Working Paper on Productivity growth in India: determinants and policy initiatives based on the existing literature
Most of the developing countries are confronted with scarcity of natural and financial resources and, therefore, rapid economic growth using up the resource endowment of the economy comes at the expense of the future growth and poses a number of challenges for the economy. Productivity growth (or output growth which is net of input growth) is the key to the long run sustainability of growth as well as development because with rapid productivity growth proportionately less resources will be required to raise the growth by one unit and the scarce resources can be released from the growth process to be utilised for the overall development of the economy. So the interest in the component of growth which is non-input based has grown enormously over the years. Issues related to its estimation are innumerable. However, a detailed review of those issues is outside the scope of this study. On the other hand, this paper aims at (a) examining the patterns of productivity growth across broad sectors of the Indian economy, (b) identifying the determinants of productivity growth and policy variables for experiencing an enhanced productivity growth; and (c) reviewing the ongoing policy initiatives of the government. However, the study does not carry out any independent research; instead it reviews the plethora of existing studies to encompass the issues mentioned above.