India up 16 places to 55th on global competitiveness index

Geneva: In a big jump, India has moved up 16positions to rank 55th on a global index of the world's most competitive economies, where Switzerland remains on top. The jump in India's position underlines the country's recent economic recovery, improvement in the competitiveness of the country's institutions and its macroeconomic environment and a "slight improvement" in infrastructure, the World Economic Forum (WEF) said in its latest Global Competitiveness 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. Among emerging economies, India has ended five years of decline with a 16-place jump to 55th position.

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However, South Africa is ranked higher and it has re-entered the top 50, progressing seven places to 49th. WEF said that the most problematic factors for doing business in India include corruption, policy instability, inflation and access to finance. The areas where India ranks better were investor protection, gross national savings, quality of education system, venture capital availability, hiring and firing practices, GDP and domestic market size, public trust in politicians and burden of government regulation. Elsewhere, macroeconomic instability and loss of trust in public institutions has dragged down Turkey (51st), as well as Brazil (75th), which posted one of the largest falls.

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 said. In terms of competitiveness of its institutions, India is ranked 60th (out of total 140 countries and up 10 positions from last year), while for infrastructure it has gained six places to 81st. For macroeconomic environment, India is ranked 91st, helped by a reduction in commodity prices and improvement in the government's budget deficit.

WEF further said, "To improve further, India must stay the course -- its overall ranking is still hampered by one of the highest budget deficits in the world (131 out of 140)... "(Besides) the quality of its electricity supply which is still too low (91st) and, surprisingly for a country with so many IT champions, the overall technology readiness of its businesses, which comes in at a poor 120, up just one position on 2014." WEF said its survey of top executives also finds corruption followed by political instability and inflation, as the most problematic factor to doing business in the country.

The Geneva-based think-tank further said a failure to embrace long-term structural reforms that boost productivity and free up entrepreneurial talent is harming the global economy's ability to improve living standards. The study, released today, assesses 140 countries on the basis of factors driving their productivity and prosperity. "The failure, particularly by emerging markets, to improve competitiveness since the recession suggests future shocks to the global economy could have deep and protracted consequences," WEF said. It further said the latest index also finds a close link between competitiveness and an economy's ability to nurture, attract, leverage and support talent.

The top-ranking countries all fare well in this regard. But in many countries, too few people have access to high-quality education and training, and labour markets are not flexible enough. As per the report, seven years after the global financial crisis, the world economy is evolving against the background of the "new normal" of lower economic growth, lower productivity growth, and high unemployment. However, rather than adjusting to this new normal, countries must step up their efforts to re-accelerate economic growth, it added. While no member of the South Asian Association for Regional Cooperation (SAARC) features in the top 50, India leads in this group at 55th place.

All others are ranked 100th or below, while India is followed by Sri Lanka (68th, up five), Nepal (100th, up two), Bhutan (105th, down two), Bangladesh (107th, up two), and Pakistan (126th, up three). Although last year all SAARC countries except Bhutan posted small gains, since 2007 only Nepal has managed to progress significantly (14 places gained), Pakistan lost 34 places during that period and India, despite leapfrogging 16 places this year, still ranks seven notches lower than it did in 2007. After five years of decline, India has jumped 16 ranks to 55th place. "This dramatic reversal is largely attributable to the momentum initiated by the election of Narendra Modi, whose pro-business, pro-growth, and anti-corruption stance has improved the business community's sentiment toward the government. "The quality of India's institutions is judged more favourably (60th, up 10), although business leaders still consider corruption to be the biggest obstacle to doing business in the country," the WEF said.

India's performance in the macroeconomic stability pillar has improved, although the situation remains worrisome (91st, up 10). Thanks to lower commodity prices, inflation eased to 6 percent in 2014, down from near double-digit levels the previous year. The government budget deficit has gradually dropped since its 2008 peak, although it still amounted to 7 per cent of GDP in 2014, one of the world's highest (131st). Infrastructure has improved (81st, up six) but remains a major growth bottleneck?electricity in particular.

"The fact that the most notable improvements are in the basic drivers of competitiveness bodes well for the future, especially the development of the manufacturing sector. "But other areas also deserve attention, including technological readiness: India remains one of the least digitally connected countries in the world (120th, up one). Fewer than one in five Indians access the Internet on a regular basis, and fewer than two in five are estimated to own even a basic cell phone," WEF added.