The fall in the growth of total factor productivity in the whole economy has been much greater than that in the business sector. This is attributable to the poor growth of total factor productivity in the government, infrastructure and housing sectors and their increasing share of total GDP. During the 12<sup>th</sup> Plan, the growth of total factor productivity in the whole economy was barely greater than 1% per year – half of the growth rate in the 9<sup>th</sup> Plan, itself a period when the poor performance of stateowned enterprises was holding back growth (Table 10). In the business sector, productivity also fell to below the pace seen during the 9<sup>th</sup> Plan, emphasizing the need for a new boost to efficiency in the business sector.

Structural change in the economy and the education level of the population have both been powerful factors offsetting the falling growth rate of the labor force. The movement out of agriculture added nearly 0.9 percentage point to the growth rate of the business sector between the 9<sup>th</sup> Plan period and 2016. Going forward facilitating this ongoing transformation will be a key to offsetting the likely decline in the labor force. The continuing improvement in the average level of education of the labor force is likely to continue as the poorly-educated older age groups retire and are replaced by better educated young people. This process will continue even in the absence of any increase in the proportion of young people in higher education.

**Table 10 Sources of growth in the business sector and the whole economy**

||**8**<sup>**th**</sup>**Plan**|**9**<sup>**th**</sup>**Plan**|**10**<sup>**th**</sup>**Plan**|**11**<sup>**th**</sup>**Plan**|**12**<sup>**th**</sup>**Plan**||
|---|---|---|---|---|---|---|
||**1990-**<br>**1995**|**1995-**<br>**2000**|**2000-**<br>**2005**|**2005-**<br>**2010**|**2010-**<br>**2015**|**2016**|
||||Percentage p|oints peryear|||
|**_Business Sector_**|||||||
|Capital|5.08|4.49|5.27|6.23|4.62|2.63|
|Labour|0.65|0.65|0.36|0.17|-0.03|0.08|
|Structural shift|0.65|-0.10|0.00|0.60|0.35|0.77|
|Education|0.63|0.55|0.31|0.23|0.45|0.49|
|Total factor productivity|4.99|2.83|3.80|4.28|2.44|2.29|
|GDP (business)|12.47|8.63|10.00|11.90|8.00|6.40|
|**_Whole economy_**|||||||
|Capital|3.95|4.40|4.95|5.77|5.32|4.45|
|Labour|0.55|0.64|0.39|0.21|0.19|0.11|
|Structural shift|0.48|0.26|0.42|0.58|0.61|0.30|
|Education|0.65|0.58|0.30|0.19|0.49|0.49|
|Total factor productivity|6.19|2.53|3.48|4.21|1.11|1.25|
|GDP|12.26|8.63|9.80|11.31|7.87|6.70|

_Source:_ Author estimates

# **_Conclusion_**

The growth in TFP in the whole economy has followed a similar pattern to that in the business sector except that, in the past decade, its slowdown has been far more marked. This slowdown can be traced to the evolution of TFP in the economy outside the business sector, which consists of the housing, government and infrastructure sectors. As outlined in previous sections, the growth in the capital stock in these areas has been very rapid and has accelerated in the past decade. This has resulted in measured TFP ceasing to grow and even falling in some years. Most of the investment in these sectors 26