The World Economic Forum, in its annual Global Competitiveness Report 2010-2011, defines?competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy, says WEF. In other words, more competitive economies are able to produce higher income for their citizens. The productivity level also determines the rate of return obtained by investments in an economy.
Of the 139 countries rated in the WEF report, Switzerland continues to top while the USA?has slipped to rank 4. However, the competitiveness of developing countries makes one wonder how India?s dream to be a strong global economy would be achieved. China ranks 27 while India ranks 51 as per the report. Both large emerging economies faced similar problems initially. So what has caused the difference?
Like India, China?s main strengths are its large and growing market size and relatively sophisticated and innovated businesses. In capacity for innovation China ranks 21 whereas India holds position 33. Government procurement of advanced technological products takes China to rank 12 whereas India scores 76th position. China ranks 25 in university-industry collaboration in R&D whereas India ranks 58. China ranks 55 in diversion of public funds and India 71. Public trust of politicians is where China ranks 22 while India stands at rank 88. China ranks 63 in irregular payments and bribes while India stands at 83. China ranks 37 on favouritism in decisions of government officials while India ranks 72, China is 37 in wastefulness of public spending whereas India is graded 57.
In business cost of terrorism China is ranked 79 whereas India stands at 127. When it come to burden of government regulation, India is ranked 95 while China ranks 21. Strength of investor protection in India takes it to rank 33 while China is at 77.
For its quality of overall infrastructure China ranks 72 whereas India ranks 91. For quality of roads, China is graded 53 while India 90. For quality of electricity supply, China is positioned at 52 whereas India at 110. China is ranked 57 in quality of fixed telephone lines while India 110.
For agricultural policy costs India is rated at 81 whereas China is rated at 5. In impact of business rules in FDI, China ranks 18 while India ranks 46. China has a better macroeconomic environment than India. It ranks 34 in government budget balance, whereas India is at place 80. Both countries are high in the savings rate with China standing at position 3 in national savings rate whereas India being at position 9.
The Chinese government seems to have inflation under better control. The country ranks 10 on the basis whereas India ranks 123. China?s interest rate spread is 33 and India?s is 65. China is graded 65 in government debt while India ranks 115. China?s country credit rating is 32 while it is 50 for India.
Life expectancy in China is 70 while its 109 in India. Infant mortality rate for China is high and the country ranks 75 whereas India ranks 111. Quality of primary education takes China to rank 35 while India stands at rank 98. Primary enrollment rate for China makes the country rank 7 while India stands at 95. For quality of educational system, India ranks 39 while China ranks 53. For quality of management schools, India ranks 23 whereas China ranks 63. China ranks 22 when it comes to Internet access in schools whereas India is graded 70.
The WEF attributes China?s improvement by two ranks entirely to a better assessment of its financial markets which went up 24 places from 57. However, in comparison with China, India?s gradings in financial market development are significantly superior to those of China. In availability of financial services China ranks 71 while India holds rank 45. In its affordability, China ranks 44 and India 38. In financing through local equity market China ranks 52 whereas India rates 10. In ease of access to loans, China rates 51 whereas India ranks 39. On restriction on capital flows, China is positioned at 123 while India ranks 75. On soundness of banks, China lags at rank 60 while India stands at 25. On regulation of securities exchanges, India takes the lead at rank 15 while China stands at 61. It could be a sign that if India had a better infrastructure and macroeconomic management, it would have easily reached China?s level.