Though China’s productivity has driven its growth story (along with the higher capital investments), the wheel could soon be turning. India’s investments have surged, and between 2004-05 and 2008-09, India’s productivity has grown 4.3% per annum compared to 3% for China, an ICRIER study shows.

In the manufacturing sector, productivity fell in 1997-2004 period, mainly due to the large unorganised sector. India can maintain a 4% annual productivity hike, critical for a 10% GDP growth, if telecom and banking/insurance continue to grow, unorganised industry are allowed to shut down, and the share of ICT in investments rises.