Productivity ppt

1. IMPACT OF GOVERNMENT
POLICIES ON
PRODUCTIVITY
SARABJEET SINGH (16009), BIRPARTAP SINGH (16029), KARAN (16026),
ABHISHEK BANSAL (16034), NISHA (16020)
1

2. Productivity
 Productivity gains are vital to the economy because they allow us
to accomplish more with less. Capital and labor are both scarce
resources, so maximizing their impact is always a core concern of
modern business. Productivity enhancements come from
technology advances, such as computers and the internet, supply
chain and logistics improvements, and increased skill levels within
the workforce.
2

3. Continue…..
 Productivity is measured and tracked by many economists as a
clue for predicting future levels of GDP growth. The productivity
measure commonly reported through the media is based on the
ratio of GDP to total hours worked in the economy during a
measuring period; this productivity measure is produced by the
Bureau of Labor Statistics four times per year.
 Total Factor Productivity (TFP) is the portion of output not explained
by the amount of inputs used in production. As such, its level is
determined by how efficiently and intensely the inputs are utilized
in production.
3

4. PRODUCTIVITY IN MANUFACTURING
 The studies undertaken by Reddy and Rao (1962), Banerji (1975), Goldar (1986) and Ahluwalia (1985),
came up with estimates of TFP growth that indicate that TFP growth in Indian manufacturing in the
period 1951 to 1979 was slow or negative.
 The overall conclusion one may draw from the findings of these studies is that there has been no
improvement in the rate of TFP growth in Indian manufacturing in the post‐reform period compared to
the growth rate achieved in the 1980s. Rather, TFP growth has slowed down. Trivedi et al (2011) for
instance report that the TFP growth rate in manufacturing was 1.88 per cent per annum during 1980 to
1991 and 1.05 per cent per annum during 1992 to 2007.
 THE JAWAHARLAL NEHRU NATIONAL URBAN RENEWAL MISSION:
The programme was instated to improve the quality of life and infrastructure in the cities and it covered a
total of 63 cities initially, which were later increased to 68. The mission has helped focus attention of policy
makers in all three tiers of the government on the challenges facing the cities and towns of India and
created dynamism in a sector that has long suffered neglect.
 THE NATIONAL URBAN HOUSING AND HABITAT POLICY, 2OO7:
This policy aims to bridge the gap between the supply and demand of housing and infrastructure in the
country.
4

5. PRODUCTIVITY IN AGRICULTURE
 Estimates of TFP growth are available for aggregate agriculture, crop sector,
livestock sector and even individual crops such as rice, wheat, maize and
sugarcane. Estimates have also been worked out at the state level for major
crops. Concerns have been expressed on the basis of available evidence that
agricultural growth is becoming unsustainable as a result of resource (soil)
degradation.
 Mukherjee and Kuroda (2003) report that the growth rates in TFP in Indian
agriculture were 1.45 per cent per annum during 1973‐80, 2.33 per cent per
annum during 1981‐88 and 1.21 per cent per annum during 1989‐93. Between
1973 and 1993, the average rate of growth in TFP was 2.02 per cent per annum.
 Five Indian scientists have been able to demonstrate an increase of whopping
40 per cent to 100 per cent in agricultural production using nano-technology -
one of the cheapest and abundant minerals available on earth.
5

6. PRODUCTIVITY IN AUTOMOBILES
 100% FDI is allowed under the automatic route in the auto sector, subject
to all the applicable regulations and laws.
 Manufacturing and imports in this sector are exempt from licensing and
approvals.
 The encouragement of R&D by offering rebates on R&D expenditure
 4th largest automotive market by volume, by 2015.
 4 large auto manufacturing hubs across the country.
6

7.  The growth of Indian middle class, with increasing purchasing power,
along with strong macro-economic fundamentals have attracted the
major auto manufacturers to Indian market.
 The Department of Heavy Industry, under the Ministry of Heavy Industries
and Public Enterprises, is the main agency in India for promoting the
growth and development of the automotive industry.
 The most important being the announcement of the 'Auto Policy' of 2002,
which aims to establish a globally competitive automotive industry in India
and double its contribution to the economy by 2010. The policy seeks to
set out the direction of growth for the sector and promote R&D therein so
as to ensure continuous technology upgradation as well as building up of
better designing capacities. It emphasizes on low emission fuel auto
technologies and availability of appropriate auto fuels in order to take
auto manufacturing to a self-sustaining level.
7

8. The objectives of the Auto Policy are
to:-
 Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country.
 Emerge as a global source for auto components
 Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing tractors and two-wheelers in
the world
 Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry
 Conduce incessant modernization of the industry and facilitate indigenous design, research and development
 Steer India's software industry into automotive technology
 Assist development of vehicles propelled by alternate energy sources
 Development of domestic safety and environmental standards at par with international standards
8

9.  Another milestone in this field has been the launching of the National
Automotive Testing and R &D Infrastructure Project (NATRIP) which aims to
create core global competencies in automotive sector and facilitate its
integration with the world economy
9

10. PRODUCTIVITY IN SERVICES
Table 2.1: TFP Growth in Services, by Group
(% per annum)
Sub-sector/group
Virmani (2004) Goldar and Mitra (2010)
1965 to 1979 1980 to 1991 1992 to 2003 1960 to 1979 1980 to 2006
Trade, hotels and restaurants -3.0 1.6 3.6 -3.4 2.9
Transport, storage and communication 1.5 2.8 4.9 2.0 3.0
Financing, insurance, real estate and business
services
2.4 4.1 4.7 2.0 3.9
Public administration and other community, social
and personal services.
1.1 3.5
10

11.  Indian Railways had introduced the system of Productivity Linked Bonus
(PLB) for its employees in 1979. The index, defined as the ratio of railways
output (measured by the total freight tonne kilometres and a proportion of
passenger kilometres) and input (measured by the total number of non-
gazetted staff), determines the quantum of PLB payable for a year. A PLB
of 78 days for 2010-11 was announced recently.
11

12. Productivity and Efficiency of Banks
 Banks form the core of a nation’s financial system, performing the vital function of
financial intermediation through liquidity, maturity and risk transformation. Finance is the
lifeline of any commercial activity and banks act as a link between the savers and the
borrowers. The productivity and efficiency of banks, thus, critically impacts the
productivity and efficiency of all economic activity and is a matter of concern for policy
makers and economy watchers. There are two aspects to banking efficiency which I
would like to highlight:
 (i) Allocational Efficiency: Allocational efficiency focuses on ensuring that the precious
financial resources are allotted to the most productive activities as per development
needs of society. It seeks to ensure that the broad national priorities are furthered through
the process of resource allocation and that the interests of the most vulnerable sections
are protected.
 (ii) Operational Efficiency: Operational Efficiency means banks seek to provide financial
services in a safe, secure, speedy and cost effective manner. The goal should be to
ensure that the transformation function generates least friction in terms of time and cost
overlays.
12

13.  Improvement in productivity and efficiency, and the resultant decline in cost of
providing financial services will help in furthering financial inclusion (FI). More
importantly, it will help in converting the improved access to financial services into
improved usage. This improved usage will make the FI activities commercially viable
both for the banks and for the customer and encourage them to scale up their FI
initiatives, thereby helping in quickly bringing the remaining unbanked villages into
the fold of the formal financial system. Hence, banking productivity and efficiency
has a direct impact on improving financial access and financial usage.
 The recent decline in economic growth has presented significant challenges to
banks through rising impairment of assets, pressure on margins and volatility in non-
interest income. In this demanding business environment, improved operational
efficiency will help banks in standing up to the challenges and enable them to
maintain their health and profitability. strongly believe that every time the financial
system has been faced with a crisis, a resolute push towards improved productivity
and efficiency has invariably aided it in seeing through the troubled times.
 As banks form the core of the country’s financial system, the health and profitability
of banks will help in ensuring stability and resilience of the entire financial system.
Thus, from a systemic stability perspective also, improved productivity and efficiency
of the banking system is a definite positive.
13

14. 14

15. 15

16. Government has failed to encourage
private sector in Defence production
 India's defence production is almost entirely controlled by state-owned entities.
R&D is done by DRDO (Defence Research and Development Organisation),
while the manufacturing is done by nine defence PSUs (public sector
undertakings) and the Ordnance Factory Board, which runs 41 ordnance
factories around the country
 For a country with such a large defence manufacturing base, India is unique in
its dependence on imports. Countries such as UK and France, which employ a
comparable number in the defence sector, are large exporters of weapons.
India, in stark contrast, is the world's largest importer, sending 70% of its defence
acquisition budget overseas.
 India uses about 30% of its defence acquisition budget—Rs 86,740 crore this
fiscal—to import directly, and sends most of the rest to defence PSUs. They, in
turn, spend nearly half of that money overseas as well, through an opaque
process that sometimes involves a single vendor selected at the executives'
discretion. The New Delhi-based think-tank Institute for Defence Studies and
Analyses (IDSA) puts the collective import dependency of defence PSUs at 35-
45%.
16

17. PROBLEMS
 The political pressure to perpetuate this system is immense. A statist
mindset that glorifies defence PSUs, and the large and unionised
workforce that opposes privatisation, both exert pressure on minister
Antony, who lends a sympathetic ear to such concerns.
 The other problem that structurally poses a hurdle to private sector
participation is the office of secretary, defence production. This office,
which reports to the defence secretary, is responsible for defence
production, and the performance of defence PSUs and the Ordnance
Factory Board.
 The incentive is to send orders to the companies under this office's watch
and keep the private sector out. Consequently, the order books of
defence PSUs such as Hindustan Aeronautics and Bharat Dynamics are
multiples of their turnover
17

18. Zero defect, Zero effect’ to get boost
The government is planning a major push to ‘zero defect, zero effect’ policy
enunciated by the prime minister and has asked various ministries and state-
owned companies under them to formulate plans to improve productivity.
National productivity council under the ministry of commerce and industry has
asked the ministries to set up productivity improvement committees to formulate
plan of action for 2015.
The ‘zero defect, zero effect’ policy is a part of the overall plan to improve and
grow the manufacturing sector that accounts for just 17 per cent of the gross
domestic product.
The ‘make in India’ campaign, already launched, seeks to facilitate investments in
manufacturing and to push for skill development and building of world-class
infrastructure that supports the sector.
18

19. New foreign trade policy to focus on
services, High-tech exports
The government is running a ‘served from India scheme’ for the services sector
that allows exporters to import capital goods and consumables duty-free. The
duty concession that they get is up to 10 per cent of the total foreign
exchange earned by the exporter in the previous fiscal.
The government may also allow service exporters to use these credits to pay
part of service tax liabilities but these incentives will be limited only to Indian
firms.
These incentives will give a leg-up to the sector that has been performing well
despite demand for goods remaining stagnant.
India’s merchandise exports in 2013-14 fell short of the $325 billion target and
managed to reach $312.35 billion. In 2012-13, exports stood at $300.4 billion
and in 2011-12 they were at $307 billion.
Services exports, particularly IT exports, have been showing a double-digit
growth
19

20. 8 Important Policy Measures
Introduced in India
 Special attempts will have to be made by the Central and State
Governments to implement the land reforms legislation forcefully so that
the slogan ‘land to the tiller is translated into practice. Unless this is done,
the tiller will have no incentive to invest in land and adopt new agricultural
techniques.
20

21. PRODUCTIVITY
LAND
REFORMS
Technological
Measures
Institutional
Credit
Procurement
and Support
Prices
Input Subsidies
to Agriculture
Food Security
System
Targeted
Public
Distribution
System (TPDS)
Rural
Employment
Programmes
21

22. 22