India Improves Global Competitiveness

Last Updated on January 20, 2017 by Bharat Saini

In the World Economic Forum’s (WEF) Global Competitiveness Index for 2016-17, India jumps 16 ranks to credible 39th place, after five years of decline; India has the highest rise among all economies. The Global Competitiveness Report 2016-17 assesses the competitiveness landscape of 138 economies, providing insight into the drivers of their productivity and prosperity; and highlights that declining openness is threatening growth and prosperity. It also highlights that monetary stimulus measures such as quantitative easing are not enough to sustain growth and must be accompanied by competitiveness reforms. Final key finding points to the fact that updated business practices and investment in innovation are now as important as infrastructure, skills and efficient markets. Switzerland, Singapore and United States remain the three world’s most competitive economies.

Global Competitiveness Index (GCI) The GCI released by the World Economic Forum’s (WEF) is one of the major studies which indicate how a country scores in the scale of global competitiveness. The index is calculated by aggregating indicators across 12 pillars in the report which covers both business and social indicators. These 12 pillars or indicators directly or indirectly impact the competitiveness of the country in the global arena. The GCI measures 12 pillars which include institutions, macro-economic environment, infrastructure, health and primary education, higher education and training, labour market efficiency, goods and market efficiency among others.

It is commendable that India’s competitiveness seems to have improved across the board, and in particular when it comes to goods market efficiency, business sophistication and innovation. This is largely attributable to the momentum initiated by initiatives of Prime Minister, Narendra Modi, whose pro-business, pro-growth, and anti-corruption stance has improved the business community’s sentiment toward the government. The WEF report adds that while recent reforms have focused on improving public institutions, macroeconomic stability, opening up the economy to foreign investment and increasing transparency in the financial system, a lot remains to be done. Banks remain saddled with bad debt and there is scant growth in formal employment. Thanks to lower commodity prices, inflation has eased to below 6 per cent, down from near double-digit levels the previous years. The government budget deficit has gradually dropped since its 2008 peak.

Salient Features of Global Competitiveness Report-2016-17 India has been ranked 39th among the 138 countries in the 2016-17 Global Competitiveness Index (GCI). In the 2016-17 edition of GCI, India has jumped 16 places compared to 55th position in 2015-16 GCI. India has emerged as the highest rising economy due to improvement in goods market efficiency, business sophistication and innovation. India’s overall competitiveness has increased due to improvements in institutions and infrastructure along with recent reforms such as opening the economy to foreign investors and increasing transparency in the financial system. Indian economy boasts the highest growth among G20 economies mainly due to improved monetary and fiscal policies, as well as lower oil prices which has stabilized economy. India’s competitiveness has improved across the board, particularly in innovation (29), goods market efficiency (60) and business sophistication (35) indicators of GCI. India still needs remove labour market rigidities and the presence of large, public enterprises especially in the utilities and financial sector make the economy less efficient. Top 5 Countries: Switzerland (1st), Singapore (2nd), United States (3rd), Netherlands (4th) and Germany (5th). BRICS Countries: China (28th), Russia (43rd), South Africa (47th) and Brazil (81st).

The fact that the most notable improvements are in the basic drivers of competitiveness bodes well for the future, especially the development of the manufacturing sector. But other areas also deserve attention, including technological readiness. India remains one of the least digitally connected countries in the world. Less than one in five Indians access the Internet on a regular basis, and less than two in five are estimated to own even a basic cell phone. We need to reduce infrastructural bottlenecks and improve digital access and skills to step-up productivity and boost innovativeness economy-wide. In the domain of policy, there’s the pressing need to improve the ease of doing business across sectors and jurisdictions. And in tandem, we need transparency in electoral funding across political parties to purposefully stem corruption and the generation of unaccounted black money. It would rev up our competitiveness.

Under Global Competitiveness Index Basic requirements are assessed on pillars of 1st Institutions, 2nd Infrastructure, 3rd Macroeconomic Environment and 4th Health & Primary Education. Efficiency enhancers are pillars of 5th Higher Education & Training. 6th Goods Market Efficiency, 7th Labour Market Efficiency, 8th Financial Market Development, 9th Technological readiness and 10th Market Size; and Innovation & Sophistication factors are assessed on pillars of 11th Business Sophistication and 12th Innovation.