productivity for both economies. In 1978 for both India and China, output per worker
was nearly identical in the industrial and service sectors, and roughly three times that
for the agricultural sector. Since then, India has experienced relatively slow productivity
growth in the agricultural sector, combined with an acceleration for services
beginning in the mid 1990s. By 2004, Indian labor productivity in industry and services
had risen somewhat to four and five times that for agriculture, respectively. Due to the
rapid and sustained labor productivity in industry, the productivity differences are even
larger for China. In 2004, the levels of output per worker in China were seven times
higher in the industrial sector than in agriculture and five times higher in services than
in agriculture. A recent IMF study (2006, p. 11) notes that “for the world as a whole,
labor productivity in nonagricultural sectors is about three times higher than in
agriculture.” Thus, the sectoral productivity gaps that have emerged in India and
especially China appear quite large.