Global uncertainty is on the rise: Let's focus on productivity gains

Raising labour productivity would give India's economy the resilience required to avoid slipping into a middle-income trap

- PRASANNA KARTHIK

Imagine being the world's fifth-largest economy but ranking 130th in labour productivity—that's India. This stark contradiction delivers a jolt that sits uneasily with the country's growth ambitions. While no major economy faces an imminent recession threat, there are economic, geopolitical and technological upheavals reshaping the world order. In this volatile environment, India must confront a critical but often overlooked challenge: labour productivity. Without determined efforts, our low labour productivity will continue to erode our economy's growth potential, pushing it into a middle-income trap. Therefore, addressing this gap is not just a policy priority, but an existential imperative.

In a little over a month since 20 January, when Donald Trump took over as US president, his actions and words have triggered multiple global shocks. He imposed and deferred tariffs on imports from Canada and Mexico, while drawing China into his sights for country-specific trade barriers, and then announced additional duties on steel and aluminium products (a list that has been enlarged since). Trump's approach of using tariff threats as a bargaining tool for non-trade objectives has increased policy uncertainty across the world (and within the US too), making it significantly harder for businesses to plan ahead. Whether markets should start pricing in volatility as an ongoing factor remains a pertinent question.