Inter-sectoral Productivity Differentials in India

Abstract

This study estimates the total factor productivity growth across broad economic sectors in India with an aim to explore the possibility of achieving convergence. While analyzing inter-sectoral productivity differentials, it investigates the role of human capital in enhancing productivity and also examines the sources of output growth. Broad findings from 1993–1994 to 2011–2012 indicate large variations in the sectoral employment and output shares, as do the rate of growth in income and capital stock. Productivity has grown in manufacturing and in a few services, but its contribution to growth has increased in almost all the sectors to more than 50 per cent of that of labour and capital. The impact of education is visible, albeit mildly, in augmenting employment and productivity growth. Nevertheless, catching up of agriculture with non-agricultural sectors appears to be remote in the near future. The article highlights a need to accelerate investment and productivity in agriculture, more so in view of large gaps in rural–urban income and poverty.