Can Modi make India more competitive globally?

If anyone needs convincing that the new government should urgently initiate bold, transformative reforms, the latest global competitiveness rankings provide ample fodder. India's ranking on the World Economic Forum’s Global competitiveness index fell 11 notches to 71 in 2014-15 against 60 a year before.

Sandwiched between Slovenia and Morocco, India is the lowest ranked among the BRICS economies. The rankings highlight the need for bold reforms, but is the Narendra Modi government listening? 

 

The rankings on individual parameters throw up a peculiar scenario. While India ranks higher on more complex areas of competitiveness - innovation (49th) and business sophistication (57th), on the basic drivers of competitiveness, its performance is quite miserable. 

 

A country’s competitiveness is determined on 12 indicators which are classified into three broad categories 

 

1) Basic requirements - Institutions, Infrastructure, Macroeconomic environment, Health and primary education 
 

2) Efficiency enhancers - Higher education and training, Goods market efficiency, Labor market efficiency, Financial market development, Technological readiness, Market size 
 

3) Innovation and sophistication - Business sophistication, Innovation 

 

On basic requirements, we rank 87th on infrastructure which is not surprising given the state of infrastructure in the country. But the country’s ranking of 101 on macroeconomic environment is a bit of a puzzle. In 2007-08, towards the end of the high growth phase, India ranked 48. Since then growth has plummeted and inflation has sky rocketed. India also suffered the ignominy of being clubbed along with other economies under the moniker the ‘fragile five’. But since then progress has been made on various fronts. The current account deficit has fallen and foreign capital flows are strong. The new government has committed to reducing fiscal deficit. Although inflation still remains high, such a low score is quite puzzling. 

 

Another peculiar point that the report raises is that India ranks 121 on technology readiness. For a country which boasts of almost 900 million mobile phone subscribers, this is indeed strange. It is likely the low score is on account of low internet penetration. This implies that as more and more subscribers access internet on their mobile phones, the ranking on the index will sharply rise. 

 

On labour market efficiency we rank 112, while on health and primary education we rank 98. Even on higher education and training we rank 93. With the new prime minister Narendra Modi busy selling India to the world, these rankings are indicative of how much work needs to be done on the domestic front.