In this episode of How India’s Economy Works, journalist and author Puja Mehra speaks with economists Arjun Jayadev and Amit Basole, authors of the CSIE working paper India's Labour Productivity Puzzle, about a troubling trend beneath India’s headline growth numbers: a sharp slowdown in labour productivity since 2017.
India remains one of the world’s fastest-growing major economies, employment levels have risen, and female labour force participation has increased. Yet, according to their latest research, workers today are producing far less than they would have if earlier productivity trends had continued. The conversation explores why this matters for wages, living standards, investment, and the broader health of the economy.
They discuss the rise of surplus labour, the difference between employment and productive jobs, and why much of the recent increase in work — especially for women — may reflect economic distress rather than opportunity. The episode also examines weak private investment, manufacturing stagnation, structural transformation, the limits of formalisation, and whether policies like infrastructure spending, digitalisation, and production-linked incentives are truly improving productivity.
The discussion raises a deeper question: can India sustain high growth if output per worker remains stagnant? Tune in for insights on why India’s growth story may be masking a deeper productivity crisis — and what it means for jobs, wages, and the future of the economy
CHAPTERS
(00:00) Introduction
(01:23) India’s Labour Productivity Slowdown Since 2017
(05:05) Why India’s Productivity Crisis Stands Out Globally
(09:32) How Growth Can Rise Despite Stagnant Productivity
(10:58) Surplus Labour and the Rise of Low-Quality Employment
(14:02) The Manufacturing Productivity Puzzle
(15:08) Low Wages, Weak Productivity, and Employer Incentives
(17:24) The Link Between Productivity and Wages
(18:35) Women’s Employment and Economic Distress
(20:40) The “Intensification of Dualism” in India’s Economy
(21:45) Formalisation Versus Informal Labour Expansion
(22:14) PLI Schemes, Policy Dynamism, and Missing Counterfactuals
(25:30) Cash Transfers and Structural Transformation
(27:00) Why Digitalisation Does Not Automatically Improve Productivity
(28:55) Conclusion and Final Thoughts
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