India’s global competitiveness ranking slides to 60^th position in 2013-14

India ranks at 60^th amongst 148 economies in the Global Competitiveness Index (GCI) for 2013-14, which has declined from 59^thposition out of 144 economies in 2012-13.

Snapshot of the ‘Global Competitiveness Report 2013-14

According to the Global Competitiveness Report 2013-2014, excellent innovation and strong institutional environments are increasingly influencing economies’ competitiveness. Amongst BRICS, the People’s Republic of China (29th) continues to lead the group, followed bySouth Africa (53rd), Brazil (56th) India (60th) and Russia (64th). Down one position, India now ranks 60th, continuing its downward trend that began in 2009. With a GCI score essentially unchanged since then, India has been overtaken by a number of countries. Once ahead ofBrazil and South Africa, it now trails them by several places and is behind China by a margin of 31 positions, while Russia (64th) has almost closed the gap. The report suggests that some of the world’s largest emerging market economies must engage business, government and civil society to implement long-overdue reforms.

India continues to disappoint in the areas which are considered to be the basic factors underpinning competitiveness. The country’s supply of transport, ICTs, and energy infrastructure remains largely insufficient and ill-adapted to the needs of the economy (85th), despite the steady improvement that has been made since 2006. The Indian business community repeatedly cites infrastructure as the single biggest hindrance to doing business. The report further noted that notwithstanding improvements across the board over the past few years, very poor public health and education levels (102nd) remain a prime cause of India’s low productivity. The quality of higher education is better, but enrolment rates at that level remain very low, even by developing country standards.

Meanwhile, the situation has deteriorated further on the macroeconomic front, with India now 110th in this pillar. The inflation rate and public deficit-to-GDP ratio were dangerously close to double digits in 2012, and the debt to- GDP ratio is the second highest among the BRICS. Indeed, a March 2013 survey of sovereign debt analysts reveals an increased risk of sovereign debt default over the previous year. Another major concern is the country’s low level of technological readiness (98th). Although businesses adopt new technologies relatively promptly (47th), penetration rates of fixed and mobile Internet and telephony among the population remain among the lowest in developing Asia.

Global Competitiveness Index Ranking 2013-14

Components & India’s rankings	Pillars	India’s Rank
Basic requirements (Rank 96)	Institutions	72
	Infrastructure	85
	Macroeconomic environment	110
	Health and primary education	102
Efficiency enhancers (Rank 42)	Higher education and training	91
	Goods market efficiency	85
	Labor market efficiency	99
	Financial market development	19
	Technological readiness	98
	Market size	3
Innovation and sophistication factors (Rank 41)	Business sophistication	42
	Innovation	41
Global Competitiveness Index (out of 148 economies)		60

Source: PHD Research Bureau compiled from Global Competitiveness Report for 2013-14, World Economic Forum

India’s sustainable competitiveness is also characterized by concerns in both areas of sustainability. On the social sustainability side, India’s performance is hindered by lack of access to basic sanitation and health services for many of its citizens (only 35% of the population has access to improved sanitation). Also, despite the introduction of the National Social Assistance Programmes (NSAP) in 1995, the share of population covered by the social safety net is still relatively small. This issue, combined with a large informal sector and a high share of the workforce in vulnerable employment, makes it difficult to manage the country’s growing income inequality. Altogether these structural issues make India’s competitiveness vulnerable to shocks. India’s environmental performance also hinders the achievement of sustainable competitiveness. A high level of emissions (especially in terms of particulate matter concentration) and few protected areas are wearing down the quality of the natural environment. Additionally, high agricultural water-use intensity is depleting water tables because usage is above their regenerative capacity.

Warm Regards,

Dr. S P Sharma

Chief Economist