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Global Competitiveness Rankings: Has India Really Improved

Sutanu Guru dives into some details of the Global Competitiveness Index to take another look at the Indian success story

There is much to cheer for Modi Bhakts today. First came news that Afghanistan, Bangladesh and Bhutan, along with India will boycott the SAARC Summit to be held in Islamabad in November. This is unquestionably a diplomatic victory and reflects growing global exasperation with Pakistan and its “non-state” terrorists. The other news to cheer came from the economic front. The latest (2016-17) report on global competitiveness released by the World Economic Forum reveals that India has jumped 16 places to rank at 39 amongst 138 countries surveyed for the report. If you compare it with the rankings two years ago when Narendra Modi took over as Prime Minister, the results look even more remarkable: from a lowly 71 to 39 in the latest survey.

Compared to a rank of 28 for China, the Indian rank does appear respectable perhaps for the first time. India is also the second most competitive economy amongst BRICS nations, ahead of Russia and South Africa and far ahead of Brazil. There is much praise for the efforts of the Narendra Modi regime in the WEF report; particularly its steps towards a stable fiscal and monetary policy regime along with a sincere attempt to actually improve ease of doing business. For the “Tu-Tu, Main-Main” warriors in social media, there is an icing on the cake: Pakistan is ranked at 122, well below even Sri Lanka and Bangladesh.

For any Indian, the latest rankings are good news no doubt. But does it deserve cartwheels? Let’s look at the positive side first. The most spectacular improvement is seen for the parameter goods market efficiency where India has pole vaulted from 91 to 60. Once the GST is implemented, one can expect a more dramatic improvement in the rankings. When it comes to financial market development, India ranks a remarkable 38. The other parameters where India ranks very highly are business sophistication (35) and Innovation (29). These numbers are testimony to the fact that even 10 years of unremitting crony capitalism and faux socialist policies under the UPA regime, the spirit of Indian entrepreneurship is alive and kicking. If the crippling NPA crisis faced by Indian banks is solved and if the private investment climate improves further, there is little doubt that Indian entrepreneurs are looking ahead at an area of golden growth.

The WEF has also singled out the almost herculean effort undertaken by the Modi regime to reform the labour This has resulted in India’s ranking on the labour market efficiency from a pathetic 103 to a still dismal.

But this “Herculean” effort in itself reveals the even more herculean challenges that confront the regime as it seeks to further improve its rankings. When you are ranked 84 out of 138 I labour market efficiencies, companies like Nike, Adidas, Puma, Wal-Mart, Target and dozens of others who rely on flexible labor policies to outsource manufacturing, do not even think of doing that in India; preferring countries like Vietnam and Bangladesh. That Bangladesh is now way ahead of India in garments exports is proof of this Indian failure.

Tinkering with labour policies will not lead to the Indian ranking on this parameter improving to less than 50. Genuine labour reforms are required. Two other parameters where India ranks surprisingly low are macroeconomic indicators (75) and technological readiness (110). What does this mean? One, that despite all the bluster by die hard Modi supporters, global investors and ratings agencies are still wary of macroeconomic stability in the country. Second, despite all talk of Digital India, India has simply failed to ensure technology penetrates deep into the economy. Perhaps the only consolation is that India has substantially improved its rankings on these parameters.

Now, we come to the real failure and that has to do with basic human development numbers. One area where Left leaning economists like Amartya Sen and Right leaning ones like Jagdish Bhagwati agree is that no economy can be successful, powerful and competitive unless there is a sustained and dramatic improvement in the “quality of life” of its citizens. On this front, the WEF report cruelly exposes India’s Achilles heel. On health and primary education, India ranks a lowly 85; it has in fact slipped one place as compared to the previous year. In higher education and training, India ranks 81. One can argue that there is not much that the Modi regime can do alone in this as health and education are primarily the domain of state governments. But surely the central government can lay the foundation for a sustained improvement in health and education outcomes?

To sum up, the latest WEF is cause for cheer and measured optimism. But a healthy dose of reality check is also needed. In 7 out of 12 parameters, India ranks below 50. A more realistic assessment would have given India a rank nearer 60 than 40. What explains this? One crucial parameter is market size and India ranks number 3 in this. As far as this author is concerned, the latest WEF report gives no cause for wild celebrations. But it does make us realize that the hitherto slumbering elephant is finally gathering momentum.

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