Analysis: Global Competitiveness Index

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India slips 10 places in the Index:

India has moved down 10 places to rank 68th on the annual Global Competitiveness Index compiled by Geneva-based World Economic Forum (WEF), while Singapore has replaced the US as the world’s most competitive economy. In the overall index, India scored 61.4 out of 100, as compared to 62.1 last year.

Even though India’s 2019 overall score 61.4 fell by just 0.7 compared to its 2018 score but this was enough for it to slip 10 ranks in the list. The average Competitiveness Rank of India is 56.15 from 2007 until 2019, reaching an all time high of 71 in 2015 and a record low of 42 in 2007.

Even though the overall rank of India fell down, the WEF survey found that transport and electricity infrastructures improved substantially over the past two years. India is also ranked high at 15th place in terms of corporate governance and 2nd for shareholder governance. India is also ranked 3rd for renewable energy regulation.

Around 141 countries were surveyed for Global Competitiveness Index, India is among the worst-performing BRICS nations along with Brazil (71st rank). India was ranked 58th last year, the reason cited for this drop is improvement in economic and business activities of several other countries.

Brief information about the index:

The Global Competitiveness Index (GCI) is defined by the World Economic Forum, which has been measuring competitiveness among countries since 1979. It evaluates the Total Factor Productivity (TFP) and efficiency of countries and estimates the competitiveness landscape of 141 economies through 103 indicators divided into 12 pillars.

This TFP in an economy determines the long-term economic growth of a country. The 141 countries mapped by this year’s GCI make up 99% of the world’s total GDP.

This is the fourth version of the GCI (hence referred to as GCI 4.0) which was introduced in 2018. WEF founder Klaus Schwab said, “GCI 4.0 is a compass for thriving in the new economy where innovation becomes the key factor of competitiveness”.

Meaning of competitiveness:

The World Economic Forum defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country”. So, a competitive economy is a productive economy. And productivity leads to growth, which leads to increase in income levels and improved well-being. Therefore, another way to estimate a country’s competitiveness is to evaluate how it actually promotes well-being of its people.

A country’s productivity is measured by 12 pillars of competitiveness which are grouped into three main categories:

Factor-Driven economies: Basic requirements Institutions

  • Institutions
  • Infrastructure
  • Macroeconomic environment
  • Health and primary education

Efficiency-Driven economies: Efficiency enhancers

  • Higher education and training
  • Goods market efficiency
  • Labor market efficiency
  • Financial market development
  • Technological readiness
  • Market size

 Innovation-Driven economies: Innovation and sophistication factors

  • 1. Business sophistication
  • 2. R&D Innovation

12 pillars of competitiveness are grouped into 3 factor groups, which further encompass 103 components, such as, life expectancy, infant mortality, inflation, primary education, internet users, IPR protection, female participation in labour force and many more.

These pillars are not independent; they are inter-related and tend to reinforce each other, and weakness in one pillar often leads to weakness in other pillars. Pillars are measured from 0 to 7 and components are measured 0 to 100.

5.45 to 7 score – very high indicator

4.51 to 5.44 score – high indicator

3.51 to 4.50 score – middle indicator

3.01 to 3.50 score – low indicator

0 to 3 score – very low indicator

Reasons for the slip:

The reasons cited for the slip in India’s rank are improvements in economic and business activities in several other countries. It was also cited in the report that information, communication and technology adoption in India has been weak.

Along with this, poor health conditions and low life expectancy are other reasons why India is ranked low. WEF also mentioned that the lack of worker rights’ protections, under developed labour market policies and low participation of women in labour force affected India’s competitiveness ranking.

The skills rank for India was also low at 107, despite the Center’s efforts to encourage and promote Skill India Programme for several years. The report showed that the countries which emphasis on infrastructure, skills, research and development are more successful compared to those that “focus only on traditional factors of growth”.

Its significance:

GCI analysis plays a significant role in creating favorable business-climate environment in the country. It discovers the strengths and weaknesses of a country and identifies priorities for the facilitation and implementation of political reforms.

Apart from this, productivity is important because it is the main factor for increasing growth and income levels. And income levels are important for general well-being and ultimately the economic conditions of a country.

High competitiveness means good economy and rising prosperity. World Economic Forum believes “that competitive economies are those that are most likely to be able to grow more sustainably and inclusively, meaning more likelihood that everyone in society will benefit from the fruits of economic growth”.

Conclusion: way forward

The WEF report stated that India needs to improve its skills base, where it is ranked 107th. The WEF said that functioning of labour market is also needed to be improved. The participation of women in the workforce is extremely low in India, as the ratio of female workers to male workers was at 0.26, which is also needed to be improved.

The WEF further stated that emerging economies with growing innovation capacity such as India must also better balance technological integration and human capital investments and they must improve their talent base.

So, in conclusion it can be said that there many areas where India needs to work in order to improve its rank. Infrastructure, labour market, skill base, women workers to men workers ratio research and development are some of the areas where India needs to improve. Improvement in these areas will consequently result in increase in productivity and efficiency of the country, which in turn will increase the well being of its people.

-This article is brought to you in collaboration with Shambhavi Tripathi from Panjab University, Chandigarh.

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