India has moved up one position to 49th in the The Global Competitiveness Report 2009-2010 (GCR Report), released today by the World Economic Forum ahead of its annual meeting, to be held this year in Dalian, China.

The improvement, coming in a year when the world battled the worst recession in recent history, could enthuse policy-makers, but the report highlights the yawning gap between those who benefited from reforms and those who could not do so.

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A similar gap can also be seen between rural India and its thriving economic and technological hubs, notes the GCR report. Take another example. India hosts some of the best universities in the world, and a number of Indian corporate giants have become major global players or even leaders in their fields. Yet, 42 percent of the population lives on less than $1.25 a day (in purchasing power parity), more than twice China’s equivalent number of people.

Mirroring this dichotomy, India’s competitive performance continues to exhibit a rather reversed development pattern. It ranks an outstanding 28th in the most complex areas, measured by the business sophistication and innovation sub-index, ahead of several advanced economies. The country also boasts fairly well functioning institutions (54th), bustling financial markets (16th), and a sound banking sector (25th), supported by a vast domestic market (4th largest in PPP terms).

On the other hand, the country underperforms on some of the basic determinants of competitiveness, namely health and primary education (101st), macroeconomic stability (96th)—though improving—and infrastructure (76th), the GCR report said.
 

Similarly, penetration rates for mobile telephony (116th), the internet (104th), personal computers (96th) remain among the lowest in the world, while inefficiencies in the labour market (83rd) prevent an optimal allocation of human capital.

Improvements in these areas would place India on a stronger growth trajectory. Switzerland topped this year’s ranking, while the US fell one place to the second position with the weakening in its financial markets and macroeconomic stability.

Singapore, Sweden and Denmark were the other countries in the top five, while China also moved up one position, to 30th.

The Global Competitiveness Report’s competitiveness ranking is based on the Global Competitiveness Index (GCI), developed for the World Economic Forum by professor Sala-i-Martin and introduced in 2004. The GCI is based on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development.
 

The pillars include Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Sophistication, Technological Readiness, Market Size, Business Sophistication, and Innovation.

The World Economic Forum is an independent international organisation committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas.

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