Global Competitiveness Index (GCI)

•  India’s ranking in the Global Competitiveness Index for 2016-17, released by the World Economic Forum (WEF), improved 16 places to 39, making it the fastest riser up the ranks among 138 countries surveyed.
• India’s competitiveness improved across the board, particularly in goods market efficiency (60), business sophistication (35) and innovation (29).
• Recent reform efforts by the government have concentrated on improving public institutions (up 16 places), opening the economy to foreign investors and international trade (up 4), and increasing transparency in the financial system (up 15).
• This ranking of India is the result of a mix of factors including cheaper crude oil prices (reflected in improved macroeconomic fundamentals), a slew of reform initiatives initiated by the government to unclog the system, efforts to bring in investments and reforms in the financial sector. Cheaper crude oil has played a big role in bringing down fiscal deficit to less than 4 per cent and contain inflation.
• Of the 15 segments assessed, India has shown improvement in all categories except in health and primary education. The country’s rank has gone up in infrastructure and labour market efficiency—areas where the government has faced criticism in the past.

Other highlights of the report :

• Globally, Switzerland has retained its top position as the world's most competitive economy for seventh year in a row and is followed by Singapore, the US, Germany and the Netherlands in the top-five. These are followed by Japan, Hong Kong, Finland, Sweden and the UK in the top ten.
• South Africa is ranked higher and it has re-entered the top 50, progressing seven places to 49th.
• China, holding steady at 28, remains by far the most competitive among large emerging economies, although its lack of progress moving up the ranking shows the challenges it faces in transitioning its economy, the WEF.

About Global Competitiveness Report

• The World Economic Forum (WEF) releases its annual Global Competitiveness Report (GCR).
• According to the report, competitiveness is defined as the 'set of institutions, policies, and factors that determine the level of productivity of an economy.
• The GCI combines 114 indicators that capture ideas and concepts that matter for productivity.
• These indicators are grouped into three sub-indices and further into 12 pillars of competitiveness.
• The three sub-indices are basic requirements subindex, efficiency enhancers subindex and innovation and sophistication factors subindex.
• The report also classifies economies into five stages of development primarily by taking GDP per capita into account.

Analysis:

• Despite significant improvements in infrastructure and social indicators such as health and education over the past decade, India lags other nations in various parameters.
• India’s tax regulations, corruption, tax rates and poor public health are the most problematic factors for doing business.
• The labour market rigidities and the presence of large, public enterprises especially in the utilities and financial sector make the economy less efficient. The labour market is segmented between workers protected by rigid regulations and centralised wage determination, especially in the manufacturing sector, and millions of unprotected and informal workers.
• Lack of infrastructure and ICT use (where India is ranked 120th in the world) remain bottlenecks. Besides, progress in recent years has been slow and further investment is necessary to connect rural areas and ensure they equally benefit from and contribute to India’s development.
• The country’s biggest relative weakness today is in technological readiness, where initiatives such as Digital India could lead to significant improvements.
• The efficiency of the goods market in India has also deteriorated over the past decade, and the WEF reckons this would change once the GST regime is implemented

By: Vishal