When Narendra Modi led the BJP to a majority in the Lok Sabha elections in 2014, the Indian economy was in shambles. A sense of gloom and despair was palpable. This was reflected in the country’s ranking in the global competitiveness index compiled by the World Economic Forum (WEF). India ranked 71 then. A year later, it jumped 16 places to capture the 55th rank. The recently released 2016-17 rankings show India having jumped another 16 places to rank 39 out of 138 countries surveyed by the WEF.
By itself, this jump in the global competitiveness rankings may not mean much. But for global investors and even for entrepreneurs in India, the vast improvement in rankings does send an unmistakable message: that the growth story in India is real and that it is indeed an attractive destination for investors from across the world. This is reflected in the huge jump in foreign direct investment (FDI) inflows to India in the last year or so.
The most spectacular improvement is seen for the parameter ‘goods market efficiency’, where India has pole vaulted from 91 to 60. Once the goods and services tax (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 after 10 years of unremitting crony capitalism and faux socialist policies under the UPA regime, the spirit of Indian entrepreneurship is still alive and kicking. If the crippling non-performing assets (NPA) crisis faced by Indian banks is solved and if the private investment climate improves further, there is little doubt that Indian entrepreneurs will be 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 in 2015-16 to a still dismal 84 in 2016-17. But various BJP-led government’s like Rajasthan and Madhya Pradesh have been taking concrete steps to drastically reform labour laws. In a noisy democracy like India, consensus takes a long time. Perhaps, labour laws are an example of that.
People in the government seem confident that this positive signal will be reinforced in October when the World Bank releases rankings for ease of doing business. The more cocksure officials talk about jumping 20 places in the rankings, while the more measured ones say a jump of more than 10 is guaranteed. But the success also reflects the enormous challenge for Modi. India will still rank way below 100 in ‘ease of doing business’ rankings, while Modi has promised to break into the top 50 by 2019.
