Source: Business Standard, Sept 28, 2016
India jumped 16 places for the second year in a row to the 39th rank on the World Economic Forum’s (WEF) Global Competitiveness Index 2016-17. It was ranked 55th in 2015-16. This is the largest gain made by any country on the list.
Switzerland was ranked the most competitive country for the eighth consecutive year, followed by Singapore, the United States, the Netherlands and Germany.
The rankings measure countries’ performance on three indicators — basic requirements, efficiency enhancers, and innovation and sophistication factor. Performance on these in turn is measured through sub-indicators.
“Thanks to improved monetary and fiscal policies, as well as lower oil prices, the Indian economy has stabilised and now boasts the highest growth among G20 countries. Recent reform efforts have concentrated on improving public institutions (up 16), opening the economy to foreign investors and international trade (up four), and increasing transparency in the financial system (up 15),” said the report.
On basic requirements, India jumped from 80th in 2015-16 to 63rd this year, with improvements seen in indicators such as institutions, infrastructure and macroeconomic environment. However, a mild slippage was observed on the health and primary education indicators.
On institutions, the country has jumped from 60th rank last year to 42nd, driven largely by improvements in indicators such as diversion of public funds and irregular payments and bribes, efficiency of legal framework in settling disputes, strength of auditing and reporting standards, and protection of minority shareholders.
While an improvement on the former is likely to be the result of government initiatives aimed at curbing corruption, the latter probably reflects measures taken on corporate governance and related party transactions by authorities such as the Securities and Exchange Board of India (Sebi). Surprisingly, on reliability of police services, the country moved from 86th in 2015-16 to 53rd in 2016-17.
On infrastructure, the country’s ranking improved from 81st last year to 68th, with progress seen in the overall quality of infrastructure, roads, railways, port and electricity supply.
However, despite this, the “Lack of infrastructure (68th) and ICT use (120th) remain bottlenecks. Improvement has been slow in recent years and further investment will be necessary, especially to connect rural areas and make sure they can equally benefit from and contribute to the country’s development,” it added.
Interestingly, the WEF report suggests the country has made significant progress on higher education and training. On the quality of education system, it has jumped from 43rd last year to 29th, from 63rd to 44th on quality of math and science education, and from 48th to 30th on extent of staff training.
The country has also made rapid progress on prevalence of foreign ownership (from 96th in 2015-16 to 72nd in 2016-17) and on business impact of rules on foreign direct investment or FDI (from 92nd last year to 71st this year). Presumably, this was driven by the government’s initiatives to ease FDI norms.
The WEF report also says India has made tremendous progress on labour market efficiency with its ranking improving from 103rd in 2015-16 to 84 in 2016-17. Within this, India has jumped from 86th to 67th rank on cooperation in labour employer relations, 25th to 15th on hiring and firing practices, 47th to 33rd on pay and productivity, and 86th to 66th on reliance on professional management.Notwithstanding the 16 place jump, the WEF report says “a lot needs to be done. The labour market is segmented between workers protected by rigid regulations and centralised wage determination (112th), especially in the manufacturing sector, and millions of unprotected and informal workers.”