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Productivity: China twice as good as India

By Dharam Shourie in New York
Last updated on: January 18, 2006 12:46 IST
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China leads Asian productivity with an average rate of 8.7 per cent since 2000, more than double than that of India at 4.1 per cent, a report by a global business research firm has said.

The report by Conference Board, which provides comprehensive worldwide measures of labour productivity, said India's rate stood at 4.4 per cent in 2004.

But it clarified that the figures for India should be seen in the perspective of faster employment growth at about 2 per cent during recent years, which was double the growth of labour input in China.

"China experienced a similar phase of moderate productivity growth during the late 1980s and early 1990s," the report said.

Referring to current Chinese productivity growth, it said, "This significant acceleration in productivity growth is striking as average productivity growth in China was just 3.1 per cent from 1995-2000."

This suggests that the dramatic changes in reform policies and the increase in openness prior to China's ascension to the World Trade Organisation showed their major impact during the most recent years, it added.

The report said that the times of high US labour productivity growth rates were over, at least for now, though adding it was still healthy compared to many other developed nations, standing at 1.8 per cent in 2005.

Labour productivity measures the amount of output obtained for each hour of work and determines a nation's living standards measured by per capita income.

"The US performance is still good compared to Europe," said Bart van Ark, director of the organisation's international economic research programme and co-author of the report with economists Catherine Guillemineau and Robert McGuckin.

"What is striking in these new numbers is the sustained productivity acceleration in the emerging markets of Central and Eastern Europe and Asia. In fact, economies such as China and Poland are accelerating to around 8 per cent."

Most countries in the developed world (North America, Europe and developed Asia) experienced a slowdown in productivity growth rates in 2005, with growth rates in the 1.5 to 2 per cent range.

Compared to the US, productivity was about the same in Japan (1.9 per cent), but much worse for the average of the EU-15 (0.5 per cent).

Countries at the higher end of the global productivity spectrum, the report said, were mainly emerging markets, including Eastern and Central European economies.

While Mexico's productivity growth rate was relatively low at less than 1 per cent per year both in 2004 and 2005, Korea (2.6 per cent) and Turkey (3.7 per cent) remained at the higher end of OECD countries.

Ireland, which topped the EU-15 league from 1995 to 2003, also saw a slowdown to less than 1.5 per cent since 2004.

However, the new European member states raised the European Union average. Most of the EU-10 showed a spectacular acceleration in labour productivity growth in 2005. On an average, the 10 new member states of the EU increased the labour productivity growth rate from 4.1 per cent in 2004 to 6.3 per cent in 2005.

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Dharam Shourie in New York
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