Productivity may be defined as the output from the ingredient of production, that is, land, labour, capital and organization with the inputs of raw materials, fuels, time and knowledge. Productivity is the result of the skill and efficiency with which the various inputs are converted into goods and services. Technically, it may be referred to as the ratio between the input and output with respect to given resources.
When there is more production with the same consumption of resources it may be termed as effectiveness and when the same amount is produced at less cost it may be termed as efficiency. Some of the objectives of productivity are efficiency, maximum output, economy, quality, elimination of waste and satisfaction of human beings through increased employment, income and better standard of living.
Among several concepts of productivity the two relevant concepts are - labour productivity and total factor productivity. Labour productivity is the ratio of the output produced by a firm, industry or nation to the number of worker-hours employed in producing this output. Total factor productivity is the ratio of the output to the total input needed for its production. Total factor productivity is the more accurate indicator of the economic efficiency of a firm, industry or nation than labour productivity.
The term ‘productivity’ is different from the term ‘production’. Production relates to a volume while productivity is a ratio. Increased production does not necessarily mean increase in productivity. If the input of resources goes up in direct proportion to the increase in output, the productivity will remain the same.
Strangely, India has cheap labour with high labour cost due to low productivity levels. This results in other cost effective measures. Some of the reasons for low productivity are: lower skill levels, obsolete technology, loss of time due to industrial unrest and absence of proper work culture.
India has found a place among the industrialised economies, including the US and EU nations, for accelerated labour productivity, according to a recent report of the International Labour Organisation (ILO).