India climbs 16 places in WEF’s Global Competitiveness Index

In a rather dramatic turnaround, India has climbed a spectacular 16 places to the 55th position among 140 economies in this year's World Economic Forum (WEF) Global Competitiveness Index...

In a rather dramatic turnaround, India has climbed a spectacular 16 places to the 55th position among 140 economies in this year’s World Economic Forum (WEF) Global Competitiveness Index, ending five years of decline.

The list was topped by Switzerland, followed by Singapore, the US, Germany and the Netherlands. Among the larger emerging markets, South Africa progressed seven places to 49th place, while China held steady at 28, Indonesia was 37th (down three) and Brazil was 75th, the WEF said.

India’s dramatic reversal is largely attributable to the momentum initiated by the election of Narendra Modi, whose pro-business, pro-growth and anti-corruption stance has improved the business community’s sentiment toward the government. The quality of India’s institutions is judged more favourably (60th, up 10), although business leaders still consider corruption to be the biggest obstacle to doing business in the country.

In a bid to help India leapfrog into the top 50 in the World Bank’s ease of doing business rankings by 2017 from the low 142nd (out of 189 countries), the Modi government, with the help of the bank, has carried out a state-wise assessment of implementation of business reforms. The sub-national exercise was also aimed at improving the spirit of cooperative and competitive federalism to, in turn, push up India’s ranking.

According to the WEF, India’s performance in the macroeconomic stability pillar has improved, although the situation remains worrisome (91st, up 10). Thanks to lower commodity prices, inflation eased to 6% in 2014, down from near double-digit levels the previous year. The government’s budget deficit has gradually dropped since its 2008 peak, though it still amounted to 7% of GDP in 2014, one of the world’s highest (131st). Infrastructure has improved (81st, up six) but remains a major growth bottleneck — electricity supply in particular (91st).

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 (120th, up one), surprisingly for a country which is reckoned internationally as an IT powerhouse. Fewer than one in five Indians access the internet on a regular basis, and fewer than two in five are estimated to own even a basic cell phone.

Elsewhere in the world, the WEF report found worrying signs that a “new normal” of suppressed economic and productivity growth and persistently high unemployment is damaging resilience and leaving the world vulnerable to another protracted slump.

At a time when the government is pushing the ‘Skill India’ initiative on mission mode to help the country take advantage of the demographic dividend, the report has showed that India was ranked a poor 90th in higher education and training. In labour market efficiency, too, India is at a lowly 103rd, indicating the need for further labour reforms. Restrictive labour regulations, poor work ethics in labour force, inadequately educated workforce, insufficient capacity to innovate, complexity of tax regulations, inefficient bureaucracy, high tax rates, foreign currency regulations and difficulties in access to financing were also highlighted by the report as the most problematic factors for doing business in India.