India races up 16 rungs on global competitiveness index

The Narendra Modi government’s initiatives to improve the business and policy environment received thunderous validation from the World Economic Forum, which recorded India’s ascendance by 16 ranks to the 39th spot in the Global Competitiveness Index in 2016-17.

India, which ranked 55th last year, registered the sharpest improvement among 138 countries assessed.

“India’s competitiveness has improved across the board, in particular in goods market efficiency, business sophistication, and innovation,” said the report, prepared by the WEF.

India is now the second-most competitive country amongst the five-nation BRICS bloc, behind China, which is at the 28th spot.

The WEF’s acknowledgement of India’s global competitiveness comes barely days after the rating agency Moody’s raised concerns over the health of the country’s banking sector and the insufficient evidence of “tangible” reforms, and said that a rating upgrade must await a year or two.

Noting that India now has the highest GDP growth among the G-20 countries, the WEF report credited improved monetary and fiscal policies as well as lower oil prices for the improved economy.

“Recent reform efforts have concentrated on improving public institutions, opening the economy to foreign investors and international trade, and increasing transparency in the financial system,” said the report.

However, it also noted the areas of concern, including the labour market, which is marked by “rigid regulations and centralised wage determination, especially in the manufacturing sector, and millions of unprotected and informal workers.”

Ahead of the GST (goods and services tax) regime, which is expected to be rolled out from April 1, 2017, the report noted that the efficiency of the domestic market is hindered by fiscal regulations, in particular the varying rates of value-added tax.

The domestic market is also challenged by large power and financial sector public sector enterprises, which are marred by non-performing loans, it added.

“Finally, lack of infrastructure and ICT use remain bottlenecks. Improvement has been slow in recent years and further investment will be necessary, especially to connect rural areas,” said the report.

According to the Index, Switzerland ranks as the most competitive nation, followed by Singapore and the US. The Netherlands and Germany are at the fourth and fifth spots, respectively.

The Global Competitiveness Report 2016-17 also noted that declining openness is threatening global growth and prosperity.

It also underlined that monetary stimulus measures such as quantitative easing are not enough to sustain growth and must be accompanied by competitiveness reforms.

COMMENT NOW