India Vs China - Labour Productivity

Ejaz Ghani's graphic clearly illustrates the much higher service sector labour productivity of India compared to China's similar advantage in the manufacturing sector over the 1991-2005 period.



He draws attention to the challenge for both countries to catch up in their weaker sectors,

"Services are more skill intensive compared to manufacturing, and so it creates fewer jobs. India now needs to develop its manufacturing sector to create jobs for the millions of additional workers who will join the labour force every year for the next two decades. China, on the other hand, needs to develop services and go up the value chain, from less skill-intensive to more skill-intensive activities. Developing services will enable China to avoid the inevitable middle-income trap, which is more difficult to avoid if it just relies on manufacturing as a source of growth."