While labour productivity is expected to play an important role in determination of industrial
wages, there are several other factors including the labour market conditions that are expected
to influence the wage setting process. Therefore, this paper investigates these other factors
while studying the wage-productivity relationship. One part of the paper is devoted to an
analysis of growth in labour productivity and real wage rate using time-series data. The
purpose of this analysis is to assess how far gains in labour productivity get translated into
higher wages. The analysis is carried out using time-series data on real wage rate and labour
productivity for the organised manufacturing sectors of different states as well as such timeseries
data at the all-India level. Another part of the paper is devoted to a detailed crosssectional
econometric analysis of the relationship between wage rate and productivity. This
analysis is carried out for the year 1998-99. Variations in labour productivity and wage rate
across three-digit industries and major states are examined. How state-specific and industryspecific
factors influence wage determination is investigated.