Technology-Driven Growth and its Welfare Implications: Evidence from Indian Industry

Abstract

Abstract
The significance of productivity and efficiency can be understood in several perspectives. The theory of distribution states
that, at equilibrium, each factor of production is remunerated in proportion to its marginal product. From an industrial
perspective, higher productivity leads greater production efficiency, thereby enhancing firms and industries. From the
viewpoint of welfare: productivity shows how well an economy can make greater goods with fewer factors of production,
like people or money, while decreasing the costs of making and using products. From the 1980s onwards, as technology
develops, almost all economies have experienced a persistent fall in labour’s share in national income compared to Capital’s
Share. A shrinking proportion of income going to workers in the form of wages and benefits tends to widen income
inequality, thereby reduces economic growth. In India, too, has a similar trend since the 1980s, with the share of wages and
salaries in gross value added showing a declining trend (ILO 2017). Rising capital intensity has led to a contraction in labour
demand, while shifts in the composition of capital have introduced biases in labour demand. As these developments
occurred, the share of wages relative to gross value added has decreased (Thomas Piketty, 2014). Labour is receiving a
lower proportion and decrease in labour's bargaining power has declined the union membership and rise in unemployment.
Thus, this view is gaining increasing significance within the current discourse of development policy. This study identifies
the persistent and significant decline in welfare effects of Automaton on Indian industrial sector.

Key words: Technology; Productivity; Automation; Economic Growth; India KLEMS; Social welfare