Reserve Bank Deputy Governor M D Patra has pitched for a multi-pronged policy response to reignite and sustain productivity and growth at a time when multiple factors which can influence the economy are at work.
The policy response has to be powered by technological capital deepening, accompanied by long-term investment in research and development to nurture a competitive innovation ecosystem, skill development through sustained educational attainments and training, and building up the physical infrastructure, he said.
Emerging Markets and Developing Economies (EMDEs) need to leverage the potential of the services sector to drive productivity growth, he said in his inaugural address at the Sixth Asia KLEMS Conference on Sunday at Lonavala.
Investing in ICT infrastructure, securing reduction in trade costs like those associated with shipping, logistics and regulation and supportive business-enabling reforms could help to engage the private sector in partnering in this endeavour, he said.
In addition, he said, raising labour force participation rates, especially among women and older workers, could also boost productivity, but this will require investments in workability, retraining and acquisition of new skills in line with changing technology.
Citing OECD, he said, digitalisation as a key avenue for future productivity growth by harnessing the power to rapidly diffuse and replicate ideas, informational goods and business processes at near-zero marginal cost.
Easing and expanding access to finance for small and medium enterprises can generate productivity bursts, especially in EMDEs, he said.
Central banks are stakeholders in this effort in view of their mandates of macroeconomic and financial stability, he said.
A deeper understanding of productivity trends is needed by them in order to judge the position of the economy on the business cycle so as to fashion appropriate policy responses that ensure sustained non-inflationary economic growth, he said.
In turn, he said, this will promote financial market confidence and the overall flow of finance in the economy.