India’s fall on the competitiveness index is a reminder of its failings

Competing on the global stage is a bit like running up an escalator that’s rolling down: it takes all the running just to stay in the same place, and sometimes even that cannot avert a backslide. India’s performance on the World Economic Forum-designed Global Competitiveness Index 2019 is testament to the validity of that law of locomotion. On the index, which rates national institutions, policies and other factors that determine the level of productivity in an economy, India’s ‘progress score’ of 61.4 in 2019 (on a 0-to-100 scale, where 100 represents the ideal) is only marginally lower (by 0.7 points) than it was last year. But so fierce was the competitive spirit of a handful of other countries that India’s ranking fell 10 notches to 68th spot out of 144 countries. That India, among the world’s fastest-growing economies, ranks lower down than other developing countries such as Vietnam (which vaulted up 10 rungs this year to finish at 67th spot) should occasion some sobering reflection on the reasons why — beyond hyperbolic assertions — India punches below its weight.

A granular analysis of India’s performance on various parameters lays bare the country’s many failings. Indicatively, India’s ranking was undermined by its relative underperformance on five of the 12 ‘pillars’: health (rank 110), primarily owing to low healthy life expectancy; product market (rank 101), a reflection of India’s poor record of ‘trade openness’ and high tariffs; adoption of Information and Communication Technologies (rank 120), largely owing to low rural teledensity and Internet penetration; labour market flexibility (rank 103), owing to policy rigidities, the absence of meritocracy, and poor female participation in the labour force; and skills (rank 107), owing to inadequacies in the education system, particularly the failure to inculcate critical thinking skills. Some of these are inter-generational legacy failings, which cannot be remedied within a few years. And although India has made gradual progress on some of these counts, the pace of change needs acceleration if the country is not to backslide. There is one other revelatory point in the Global Competitiveness Report, which challenges the traditional narrative that focusses on the trade-off between growth and sustainability. Citing evidence from some economies, the Report establishes that achieving productivity growth is not only compatible with greater equality and environmental sustainability, but may in fact spur quality economic growth.

As the Report makes clear, sustained economic growth remains a critical pathway out of poverty and a core driver of human development. In fact, it claims, there is overwhelming evidence that growth has been the most effective way to lift people out of poverty and improve their quality of life. That may be a truism, but the message bears reinforcing at a time when India’s GDP growth rate is scraping multi-year lows.

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