Southern states need to step up productivity: Chief economic advisor Anantha Nageswaran

CHENNAI: Southern states can do more to improve labour productivity, gross value addition, research and skilling, said chief economic advisor Dr V Anantha Nageswaran on Monday.

Speaking at the CII South Global Linkages Summit here, he said the southern states have performed well in GDP per capita, labour force participation, skilling and gross value addition in manufacturing but there is room for improvement.

He said the total number of people engaged in manufacturing in south India is 33% but output share is only about 26%. "So that tells you that there is scope for improvement in productivity," he said, adding, while these states have basic skilled workforce, it needs to improve professional skills and very high order professional skills, especially with the global developments of high value-added manufacturing and adoption of artificial intelligence.

“The contribution of southern states to research and development is about 28% and yet less than 0.8% of their state domestic product…That is where academia, industry collaboration has to be much greater than what it has been so far,” he said.

Southern states have done well in economic and social progress and should benchmark themselves against the world, not within India, he added.

The CEA urged the private sector to step up research and development (R&D) and capital formation while maintaining a balance between capital deployment and labour employment.

“My appeal to the private sector would be to better balance between capital deployment and labour employment, understanding the medium-term consequences of profitability versus wage growth and also with respect to workplace culture and the implications for mental health,” he said.

Nageswaran said scaling businesses, upskilling, more focus on R&D and deregulation are the key to balance the trade-off between productivity and employment.

“Scale will naturally enable you to drive the advantage of higher employment and lower labour cost. And if you have a skilled workforce that also obviates the disadvantages you see from hiring more workers,” he added.

Meanwhile, the CII on Monday released a report titled ‘2047 Southern Odyssey: Powering Ahead to a $10 Trillion Economy,’ highlighting steps in south India’s economic growth.

R Mukundan, VP of CII and MD and CEO of Tata Chemicals, said, “Strengthening electric vehicle infrastructure and fostering industry-policy collaborations will be key to accelerating south India’s global competitiveness in sustainable technologies.”

R Dinesh, past president of the CII, said, “South India stands at a crucial financial and economic turning point. Seamless credit access and strong fiscal policies are key to achieving its $10 trillion goal. With strategic investments and industrial growth, the region can drive India’s economic momentum while fostering innovation and entrepreneurship.”