India’s Employment and Productivity Patterns in the Post-reforms Period: A Brief Analysis with Regard to the Manufacturing and Services Sectors Using KLEMS Data

Abstract

This study seeks to elicit trends and patterns of employment and labour productivity following the reforms of 1991, along with the association between the two using Capital, Labour, Energy, Materials and Service (KLEMS) data. The findings indicate that since 1991, both employment and labour productivity have been on the rise in India’s manufacturing and service sectors. Additionally, a beneficial relationship between the two is established. However, this research also uncovers other significant insights. First, employment generation has not met expectations, as evidenced by employment elasticity in both sectors. Second, there is a critical need to enhance the long-term performance of employment and labour productivity in manufacturing as well as services. To meet these challenges, it is crucial for industry stakeholders to focus on upskilling and reskilling the existing workforce to elevate productivity and minimise job losses. Efforts must also be made to adopt cutting-edge production technologies so as to improve labour productivity in future, while also emphasising the importance of training.

JEL Codes: J21, J24, L6, L8, O20