Defining productivity is one of the hardest things to do in economics. A well-known economist-journalist reminded me of it when I used that word in an email and he asked me for my definition. It is hard. It is a bit like beauty and obscenity. You know it when you see it. Of course, it is not as hard as those concepts. In factories, labour productivity can be measured. But capital productivity is somewhat more problematic, and low productivity may not be entirely for internal reasons.

Suppose the construction of a factory begins in year one and some capital is committed. But, let us say, approvals take forever to come – environmental, legal, utility connections, etc. Here, capital has been committed and invested, yet there is no production to show. There is unproductive capital here. But one cannot say it is the fault of the enterprise or the entrepreneur.

Total Factor Productivity (TFP) is even more complex. It is the residual. Output growth that cannot be explained by input growth is TFP.

Further, in the case of India, with services dominating the economy, it is even harder to get a grip on productivity. Measuring productivity in the services sector could be problematic as there could be a conflict between the micro and the macro on this. This is not the place to elaborate it, but more on that on another occasion.

It took a laborious (for me) blog post to establish that units/factories covered by the Annual Survey of Industries (ASI) are not ‘informal’. They are registered under the Factories Act, 1948, under Sections 2 (m) (i) and 2 (m) (ii). They are not covered in other surveys of unincorporated and unorganised enterprises by the NSSO, etc.

Therefore, productivity of the smaller factories – to be presented below – is not the same as productivity of informal manufacturing enterprises.

I prepared two tables on productivity statistics for ASI – factories. The latest ASI is for 2014-15, released in March 2017. The tables below are based on statistics presented in Statement 11-A (‘Principal Characteristics by the Size of Employment’ – Section 7, Page No. S7-3).