Productivity to drive 35% of India's future manufacturing output: KPMG
Higher workforce productivity could drive nearly 35% of India’s future manufacturing output, according to KPMG. Its analysis found productivity-leading manufacturers recorded stronger profit and market-cap growth, but more than 70% of large companies may need significant changes to achieve the required gains.
A KPMG report suggests that a 30 percent boost in workforce productivity could account for nearly 35 percent of India's future manufacturing output, highlighting productivity as the most potent growth driver for the sector's long-term expansion. The report underscores that productivity improvements yield a more enduring and substantial impact than growth stemming solely from scale or demand, as they continuously elevate output, margins, and competitiveness year after year.
Analyzing over 130 large Indian manufacturing firms over a decade, KPMG found a robust correlation between workforce productivity and business performance. Companies exhibiting superior productivity growth witnessed annual net profit growth ranging from 10-11 percent, compared to a mere 7 percent for firms with average productivity.
Moreover, productivity-leading companies experienced more substantial market capitalization growth, with a compound annual growth rate (CAGR) of approximately 19 percent, in contrast to nearly 10 percent for average-productivity organizations.
However, the report notes that productivity enhancements are unevenly distributed across India's manufacturing landscape. Over 70 percent of large manufacturing entities would necessitate transformative actions to attain the requisite productivity growth to meet India's manufacturing objectives. The report also underscores a substantial disparity between smaller and larger factories, with small and unorganized manufacturing units generating less than 20 percent of output per worker compared to their larger counterparts.
Furthermore, productivity gaps among companies within the sector can span between 300 percent and 1,000 percent.
KPMG identifies six pivotal levers for manufacturing growth: productivity, workforce transitions, global integration, investment in capacity, innovation and technology, and consumption-led growth. Nevertheless, the report emphasizes productivity as the most significant lever because its gains can be sustained over time. Unlike scale or demand-driven growth levers, productivity improvements permeate the system permanently, as reported by the KPMG analysis.
To elevate productivity, companies must reimagine work organization, organizational structures, and workforce deployment, bolstered by digital and AI tools, performance management, and cultural shifts in the workplace.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
