Boosting Productivity: The Key to India's Manufacturing Surge

A KPMG report highlights productivity as the foremost driver of growth in India's manufacturing sector, projecting that a 30% improvement could account for 35% of future output. Despite this potential, challenges remain, especially for smaller factories, necessitating transformative measures across the industry.

A recent KPMG report highlights workforce productivity as a crucial lever for driving India's manufacturing growth, suggesting a 30% increase could contribute to 35% of the industry's future output. This reinforces productivity as the most enduring growth driver, surpassing scale or demand-led expansions.

The analysis of over 130 major Indian manufacturing firms over a decade reveals productivity improvements leading to stronger business performances. Companies exhibiting high productivity growth saw net profits rise by 10-11% annually, outpacing the 7% growth seen in average-performing firms. These organizations also achieved an impressive market capitalisation growth of around 19% CAGR, nearly doubling that of their average counterparts.

However, the report underscores the uneven distribution of productivity improvements across the sector. Over 70% of large manufacturing firms will require transformative actions to meet desired productivity levels. It highlights a notable disparity between small and large factories, with smaller operations producing significantly less per worker. The report points to productivity, digital innovation, and workforce restructuring as key factors to bridging these gaps and tapping into sustained growth.