In the latest edition of the World Economic Forum’s (WEF’s) Global Competitiveness Index, India ranks 40th out of 137 countries. While the country has slipped one spot from last year, it has bettered its score, indicating improvements on some parameters. As shown in Chart 1, Switzerland tops the rankings, followed by the United States, Singapore, and the Netherlands.
The index is designed to measure factors that determine productivity, which, in turn, determines a country’s long-term growth.
As shown in Chart 2, the report finds that a country’s performance on the index in 2007 was correlated with its growth over the following decade. Within each income classification, the three most competitive economies in 2007 have grown significantly more strongly than the three least competitive countries in that particular income category.
A stronger performance on the index is also correlated with the WEF’s inclusive development index as shown in Chart 3.
India’s performance on the index has improved significantly over the last three years. As shown in Chart 4, the country’s ranking had deteriorated to 71 in 2014-15 from 60 the year before. Thereafter, its ranking rose steadily, largely on account of an improvement in its ranking on the macro-economic environment from 101 in 2014-15 to 80 in 2017-18. Of the three sub-indices, India ranks higher on market size, innovation and business sophistication, and institutions as seen in Chart 5.
Interestingly, despite the high-profile crackdown by the government on black money, corruption still turned out to be the most problematic factor for doing business among the executives surveyed by the WEF, as seen in Chart 6. It was followed by access to finance, tax rates, and inadequate supply of infrastructure.