India slips five ranks on competitiveness index

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SummaryIndia has slipped by five ranks in the latest Global Competitiveness Report because its performance in areas like supply of transport and energy infrastructure worsened last year.

India has slipped by five ranks in the latest Global Competitiveness Report because its performance in areas like supply of transport and energy infrastructure worsened last year. The list brought out by the World Economic Forum has retained Switzerland at the top of the rankings for 2011-12. Singapore came in second by overtaking Sweden.

The weakness in the advanced economies is best highlighted by the changing rankings of the US and Japan. While the United States continued its decline for the third year in a row, falling one more place to fifth position. Japan fell three places since last year.

The rankings show that while competitiveness in advanced economies has stagnated over the past seven years, it has improved in many emerging markets mirroring the shift in economic activity from advanced to emerging economies and placing their growth on a more stable footing.

Among Bric countries, China continues to charge ahead, up one more place to the 26th position. Among the four others, South Africa came next at the 50th spot, followed by Brazil (53rd) India (56th) and Russia (66th). However, while South Africa and Brazil moved up in the rankings both India and Russia experienced declines. So India’s gap with China on competitiveness is widening with the score difference between the two economies increasing sixfold since 2006. On the points scale the gap has expanded from less than 0.1 to 0.6 points.

India’s ranking has been affected by its mediocre accomplishments in the areas seen as the basic factors underpinning competitiveness. The country’s supply of transport, ICT, and energy infrastructure remains largely insufficient and ill-adapted to the needs of business pushing its ranking in this sphere to 89th position. Though the situation has been slowly improving since 2006, it has not translated into a higher ranking because other countries have been improving faster.

The picture is similar in the health and basic education pillar. Despite improvements across the board over the past few years, public health and education remain prime causes of concern. There have been some positive trends in these areas but the same can’t be said of the institutions and macroeconomic environment, the other two dimensions comprising the basic requirements component of the GCI.

But what is more worrisome is that since 2006, India’s score in the institutions’ pillar has plunged from 4.5 to 3.8. Once ranked at a satisfactory 37th in this dimension, India now ranks 69th, having dropped 11 places this year alone. Meanwhile, the macroeconomic environment (where the country is ranked 105th) continues to be characterised by large and repeated public deficits and the highest debt-to-GDP ratio among the Brics. More recently, the stability of the country’s macroeconomic environment is being undermined by high inflation, near or above 10%. As a result, India has been hovering around the 100-mark in this pillar for the past five years.

The report however points out that despite these considerable challenges, India does possess a number of remarkable strengths in the more advanced and complex drivers of competitiveness.

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