The RBI-funded India KLEMS project (a co-ordination between RBI and ICRIER) is a relatively new initiative for measuring Productivity. As part of an ongoing global initiative to develop an internationally comparable database, the KLEMS (Capital, Labor, Energy, Material, and Services) Framework examines the growth performance of 31 sectors (agri, industry and services) during the period 1980-2005, divided into 4 subperiods.
The study finds that the deceleration in GDP to 5.7%YoY during 1997- 2005 from 6.5% during 1992-97 can be explained by a moderation in TFP to 1.7% from 2.6% earlier (see p. 2). These estimates are concerning, and are a bit lower than the estimates of Bosworth, Collins and Virmani (2007) for 1999- 2004 (pegged at 2%). Data is further supported by an ILO study, which indicates that, although labor productivity in India has been growing, it remains 33% lower than the ASEAN region.
While growth in the last decade was led by government reforms and policy reform, we believe the decade ahead will see yet another productivity surge, driven largely by innovation, or technological change. However, as mentioned earlier1, much more needs to be
done in terms of improving the institutional R& D climate, encouraging the private sector, and providing funding for Early Stage Technology Development.