Productivity could drive 35% of India’s future manufacturing output, KPMG says

A sustained 30% improvement in workforce productivity could drive nearly 35% of India’s future manufacturing output, making productivity the sector’s strongest long-term growth lever, according to a KPMG report.

The report said productivity gains have a more durable effect than growth based only on scale or demand. They can raise output, profit margins and competitiveness year after year. KPMG’s analysis covered more than 130 large Indian manufacturing companies over a decade and found a strong link between productivity and business performance.

Companies with above-average productivity growth recorded annual net profit growth of about 10% to 11%, compared with roughly 7% among companies with average productivity. Their market capitalisation grew at an annual compounded rate of about 19%, versus nearly 10% for average-productivity organisations. KPMG said the leading companies achieved more than 50% higher profitability growth and twice the market-capitalisation expansion of their peers.

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Productivity is Indian manufacturing's most powerful growth lever.

The gains remain uneven across the sector. More than 70% of large manufacturing companies would need transformative measures to reach the productivity growth rate required for India’s manufacturing ambitions. Small and unorganised factories produce less than 20% of the output per worker achieved by large firms, while productivity differences between companies can range from 300% to 1,000%.

KPMG identified six broad growth levers: productivity, workforce shifts, global integration, capacity investment, innovation and technology, and consumption-led growth. It said productivity stands apart because its benefits can become embedded in the system. Companies will need to rethink work organisation, corporate structures and workforce deployment, supported by digital and artificial-intelligence tools, performance management and workplace-culture changes.

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Productivity improvements embed permanently into the system, raising output, margins, and competitiveness year after year.