Paisa vasool: India Inc gets more productive

While the recent debate on 70-hour work weeks has been polarising, data shows employee productivity of India Inc – measured as revenue per employee – has steadily gone up in the past five years, even as staff cost as a proportion of total revenues has largely been maintained at 10%.

Data compiled by ET Intelligence Group shows the cumulative revenue per employee of ET-500 companies – the top 500 listed companies based on their revenues – has climbed 36% from ₹1.46 crore in FY19, to almost ₹2 crore in FY23.

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This, even as employee cost as a proportion of revenues has largely remained stagnant at nearly 10%. Revenue per employee did drop during the pandemic to ₹1.37 crore in FY21, but has since increased steadily over the past two years, coinciding with a period of increased digitalisation across sectors.


Services sector supporting trend

“During inflationary times, revenues tend to go up – so one has to be mindful of this fact when looking at productivity. If revenues were to be inflation-adjusted, then the trend would not be so promising,” cautioned Madan Sabnavis, chief economist, Bank of Baroda. “Despite this, productivity has actually improved. We are seeing increasing use of tech and capital. Certain sectors like high-end manufacturing and services like BFSI and IT have seen increase in productivity due to higher skill sets being employed, unlike other sectors such as transport & logistics, construction, mining and retail that still employ labour at the low level,” he said.

From 6.15 million cumulative employees on the payroll of ET-500 companies at the end of FY19, the total number of employees rose to nearly 7.1 million at the end of FY23.


While the cumulative revenues of ET-500 companies grew at a compound annual growth rate of 12.6% during these five years, the staff cost increased at a similar clip of 12.5%.

Incidentally, the share of revenues of manufacturing companies in the total revenues of ET-500 companies has come down marginally, from 70% in FY19 to 67% in FY23. The services sector, thus, has supported the trend of increased productivity in a small, incremental way.

An economist of a leading Mumbai-based business group, who requested anonymity, attributes this trend to capital deepening and tech adoption. “As a country grows, it tends to substitute more capital for labour – especially at a time when capital has been cheap post the global financial crisis, and now, there are technology tools available that have expedited the trend,” he said. “With employee cost as a proportion of revenues likely to remain in a range, profitability will shoot up, leading to increased productivity.”

International benchmarks

While increase in labour productivity, at least in the organised sector, is a good sign, the current level still lags the global benchmark. The revenue per employee for S&P 500 companies for the 12 months ended September 2023 stood at $584,471 (~Rs 4.7 crore).

“When compared to the global average, productivity levels have lagged in India,” said the economist cited earlier. “For instance, China has become twice as productive than India within 40-odd years. There are certain sectors in India, such as agriculture and textiles, that have historically lower productivity — pulling down overall labour productivity.”

“The world has moved from agriculture to industry to services — leading to increased productivity. If we move in the same manner in India, aided by the right policy mix, tech adoption and the way our growth story shapes up, we will see employee productivity increasing steadily,” he added.

Data reveals the sectoral variation in employee productivity. The IT sector, for instance, has a low productivity with employee costs using up 45-50% of the industry’s revenues. Similarly, labour-intensive sectors such as agriculture, textiles and mining are plagued with low productivity. In sectors like auto and oil & gas, the aspect of the rising sales value of the final products sold has a role to play in improving the industry topline disproportionately over a short term — leading to improved productivity.

“Historically, India always had a problem of productivity and not the number of hours worked,” said Sunil C, chief executive of TeamLease Digital. “We are not a country that works on management by objectives. We appreciate supervised work. That’s why we struggle to decide whether we should work from home or from the office. In the tech space, the resources are paid hourly. The industry also bills hourly. So, the mindset of counting the number of hours is a cultural aspect that will take time to change.”

Besides, the cultural mindset, factors such as long commuting hours in cities, infrastructural bottlenecks and work-associated stress also hinder growth in employee productivity in India.

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