A sustained 30 per cent improvement in workforce productivity could drive nearly 35 per cent of India's future manufacturing output, making productivity the most powerful growth lever for the sector's long-term expansion, according to a KPMG report.
The report said productivity improvements have a stronger and more lasting impact than growth driven only by scale or demand, as they can raise output, margins and competitiveness year after year. “Productivity is Indian manufacturing's most powerful growth lever,” the report said, adding that productivity gains “embed permanently into the system, raising output, margins, and competitiveness year after year.”
KPMG's analysis of more than 130 large Indian manufacturing companies over 10 years found a strong link between workforce productivity and business performance. Companies with higher-than-average productivity growth recorded net profit growth of around 10-11 per cent annually, compared with about 7 per cent for average-productivity companies.
Their market capitalisation growth was also higher, with productivity-leading companies recording around 19 per cent CAGR, compared with nearly 10 per cent for average-productivity organisations. The report said these companies achieved more than 50 per cent higher profitability growth and twice the market-cap expansion compared with peers.
