Session Report
Chaitanya Deshpande
A Four-Week Immersive Online Introductory Certificate Training Course and An Online Spring School Program on Fundamentals of PUBLIC POLICY were conducted by IMPRI Impact and Policy Research Institute, New Delhi. An informative talk about ‘Enhancing Productivity and Ease of Doing Business’ was delivered by V. Ramakrishnan, MD of Organisational Development PTE Ltd. He started with remarks that the topic covers every broad aspect of the economy such as industry, agriculture, food, space, defense etc. It’s critical to understand the importance of the same.
The Significance
Productivity is essential for cost control and all-around development of business. The speaker first gave definitions of the same. It is a state of being productive or capacity to produce. It is measured production per unit effort. The traditional factors are land, labour, and capital. The knowledge, technology, innovation and culture are new additions. With the help of all these factors working together, productivity drives the ability to compete.
The value plays a significant part in improving the production. Value is a measure of benefit that can be gained from services. Economic value happens when you generate a product costing more than an input. The value chains run on the economy, efficiency and effectiveness leading to productivity.
The speaker gave examples of Japan, West Germany, the UK and South Korea to show how an increase in the same has led to economic growth. Along with land and capital, labour productivity is equally important. India has low labour productivity.
Quality vs Productivity
The quality vs. productivity debate is pertinent. The speaker mentioned that with effectiveness and efficiency, a business can have both. Its efficiency determines the productivity and consequently, revenue of a firm. To generate revenue, along with coverage of operating expenses and capital charges. The example of Toyota Motors underlines the importance of having a very strong inventory in the capital charge. Likewise, there are other factors under the heads of revenue and operating expenses which decide the value of a product in a market.
The example of China was quoted. Chinese output in textiles is almost three times higher than India. Even Bangladesh has taken a giant leap in case of textile production in the last twenty years or so.
In the specific case of land productivity, the more productive use of space is needed. Indian Railways is planning to introduce vertical space hubs above the railway stations in the form of lounges, restaurants etc. Also, electric poles above railway tracks can be used to create a network of optical fibres or broadband networks between two places. In this way, the usage of the land will increase.
The most ignored element in Indian Industry is the productive use of capital. It refers to how much revenue a unit of capital can generate. Ideally, every rupee spent by a company shall generate more than Rs 1 in revenue. However, in the case of public sector Units (PSUs) in India, only 0.25 or 0.50 Rs are getting back. Similarly in the case of Market favourites petrochemical companies like Reliance and Hindustan Unilever have less Total Factor Productivity compared to other companies. Similarly, Mr. Ramkrishnan gave examples from the IT, Infrastructure and Banking sectors comparing the capital productivity of various companies.
Another aspect along with capital is cash productivity. It can be judged by how much the company can lock up for how many days. Similarly, the Human Resources of a company also needs to be productive, and value-creating. Companies need to consider the Rupees invested as an employee cost. Poor HR productivity leads to poor overall factor productivity.
Lastly, there was a discussion about Asset productivity. Assets need to be utilised at their maximum efficiency. Also, there is a need for energy efficiency. India suffers from power cuts, differences in voltage etc. creating problems with energy efficiency.
Also, culture as a productivity factor is not in good shape in India. A report by Infosys indicates that 9 out of 10 companies lack company culture i.e. belief in action. V. Ramkrishnan highlighted that Japanese, and Germans have this cultural productivity which Indians lack.
In summary, productivity is better use of land, and better production of capital, cash and human resources. Finally, Prof. Mukul Usher highlighted how India needs to do better in the context that most of the Indian population will start ageing after 2035. Therefore, to maintain sustainable economic development, it has to be the centre of public policy discussions. Fiza Mahajan thanked Mr V. Ramkrishnan for the talk at the end.
Acknowledgement: Chaitanya is a research intern at IMPRI.
Teaser Youtube Video of Fundamentals in Public Policy Programme: https://youtube.com/shorts/mf-BjX1_C0c?si=sxDNu1yXzpmexPyc.
Read more session reports on web and policy learning events conducted by IMPRI:
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