India slips in competitiveness ranking; US remains at top

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New Delhi, May 15: India, which is rich in land, people and natural resources, has become a less competitive economy in the past one year, with the country slipping two ranks in the latest world’s competitiveness index.

The United States, on the other hand, has retained its top position despite signs of an economic slowdown there.

According to the annual World Competitiveness Yearbook 2008, released on Thursday by Switzerland-based IMD Business School, India has slipped to 29th position, from 27th in the previous year.

While China has also seen its ranking dropping by two places to 17th, it is ranked higher than India and has still managed to keep its position among the top 20 competitive economies in the world.

The Overall Competitiveness Scoreboard is calculated by combining four factors of competitiveness: economic performance, government efficiency, business efficiency and infrastructure, IMD Business School said on its website.

“Some nations can be rich in assets—land, people, and natural resources - but are not necessarily competitive. This may be the case for Brazil, Indiaand Russia,” said Stephane Garelli, professor at IMD and director of the World Competitiveness Project.

“Other nations such as Singapore, Japan and Switzerland are poor in resources and have relied essentially on transformation processes. In general, the latter nations are more competitive than the former,” Garelli added.

The US has retained its position as most competitive since 1994 with a score of 100/100, but IMD said it was doubtful whether the country would remain at the top in future as well.

“In our 20th Anniversary edition this year, we may be seeing the US in the number one position for the last time!,” IMD said. Singapore is closing the gap with a score of 99.3 and is at the second position, it said.

Besides the US and Singapore, other nations in the 10 most competitive include Hong Kong, Switzerland,

Luxembourg, Denmark, Australia, Canada, Sweden and Netherlands.

India has been given a score of 60.62 points, while that of China is 73.75. The IMD World Competitiveness Yearbook is a comprehensive report on the competitiveness of nations and is published since 1989. It provides several customised rankings, whether by size, wealth or regions.

The overall competitiveness scoreboard is calculated by combining four factors of competitiveness—economic performance, government efficiency, business efficiency and infrastructure. In an accompanying report, “Competitiveness Roadmap”, that describes and assesses the main issues that will affect the world competitiveness landscape over the next four decades, IMD said these factors include oil prices surging above 100 dollars per barrel and in places like India and China over-consumption of raw materials, stacking up of currency reserves, need for more managers and emergence of a new middle class.

Emerging powers are accumulating foreign currency reserves at impressive rates: Number one now is China with $1,647 billion, followed by Japan ($1,008 billion), Russia ($502 billion), India ($304 billion), Taiwan ($278 billion) and Korea ($262 billion).

“Shouldn't the presidents of the central banks of these nations be more associated with world monetary affairs? They have the money!,” Garelli said. The report also noted the emergence of a middle class in Asia, Central Europe and Latin America changes the nature of the world economy.

Six hundred million people have reached this status over the past 6 years, while noting that in India, 50 million people are middle class today and they will be 580 million in 2025.

It also named the emergence of a new business model for the poor as a key issue to affect global competitive landscale, saying products are manufactured and sold in places like Africa and Indian subcontinent at a fraction of the price charged elsewhere, and with minimal functionalities.

It pointed out examples of $10 phone, $100 personal computer or $2,500 motor vehicle (being made by Tata in India).