Monday, August 18, 2014

India's agriculture and manufacturing productivity failures

Three graphics from a recent cross-country study on drivers of economic growth involving more than 100 countries shows why India's economic growth lags behind China.

1. For a country where more than half the population is involved in agriculture, India's agriculture productivity gains have been smaller than all major emerging economies, despite having the catch-up advantage from lower productivity levels. In fact, as the graphic below shows, global agricultural productivity has exhibited a divergence trend between the more productive and less productive economies.
2. An even bigger failure in aggregate value added terms has been the poor performance of India's manufacturing productivity. While both countries started off with similar productivity levels in early 1990s, China has pulled ahead spectacularly. India's performance looks even more dismal given the distinct global trend of manufacturing productivity convergence between developing and developed economies.
3. The importance of manufacturing is underlined by its dominant contribution to China's GDP growth itself. As the graphic shows, India's agriculture performance has been poorer than even the low income countries.

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