“Economic growth in the recent past has been led by increase in labour productivity”. Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.

In the post liberalization period, our economic growth increased to 6% in 1990s and then it touched 7% to 8% in the 2000 decade. But this higher growth was mainly driven by service sector (IT, telecom, finance etc.) which touched 10% while agriculture and manufacturing sector remained around 3% and 5% respectively.

Our economic growth is being termed as jobless growth with the declining employment elasticity which is the ratio of percentage change in employment to percentage change in GDP.

So, India has been the fastest growing economy but without creation of much jobs. This means that we are able to produce more output with the same amount of labour which proves that our labour productivity has increased.

Labour productivity = Output (GDP)/Labour

As the output is increasing without the increase in labour/employment, this means that our economic growth is driven by an increase in productivity of labour. And our labour is becoming more productive because of use of more capital/machines.

But with growing population and workforce, India needs to create more jobs and for that our growth should come from the following sectors:

1. Labour intensive manufacturing like textiles, footwear, toys etc.
2. Shifting to high value agriculture crops like livestock, dairy, fisheries, horticulture etc. 
3. Surplus labour should shift from agriculture to non-farm jobs like food processing, storage infrastructure, logistics, unskilled manufacturing etc. 
4. Shifting to precision and smart farming techniques 
5. Building rural infrastructure and integrating with global supply chains which can increase our share of exports from the present level of 21% of GDP. 
6. Government should focus on building infrastructure and reducing logistics cost.

Government should focus more on infrastructure and logistics which can make the economy more efficient and, in the process, increasing the overall labour productivity and gains to the overall economy.