India's competitive edge

WEF's index shows India has gained in perception

India was the star performer in the latest edition of the Global Competitiveness Index (GCI) released last week by the World Economic Forum (WEF). India jumped 16 spots, overtaking its BRICS counterparts Russia and South Africa (only China is ranked better), to be ranked 39th out of the 138 countries that feature in the list. This is the best performance, in terms of sheer improvement, by any country this year and follows a similar 16-spot leap in last year's index. Of course, a country like Singapore, ranked high, has relatively less scope for improvement. Regardless, it should be good news for India, which was mired in policy paralysis, double-digit inflation and growth deceleration just two years ago.

The GCI defines competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can achieve". What powered India's success was that the country witnessed maximum improvement in three of the four areas that are given the highest weights in the index. These are health and primary education, infrastructure, and the macroeconomic environment. India has consistently improved in the first area over the past decade but in the other two, improvements have come specifically over the past two years, when the Narendra Modi government has been in charge. These improvements seem very plausible if one corroborates with the actual data, even though granular data may show that India has a long way to go on each of these parameters. Macroeconomic development has been particularly noticeable; be it inflation or the fiscal deficit, India has achieved a substantial turnaround over the past three-odd years.

However, the overall result should be treated with caution as the GCI is largely driven by the so-called Executive Opinion Survey - the performance of a country on three-fourths of the indicators is derived from this survey. This heavy reliance on a survey by business executives - results of 85 out of the 112 metrics are based on this - does rob it of its usefulness to a certain extent. That is why the back-to-back 16 place jumps in the WEF's competitiveness index run concurrent to the growing clamour about unemployment and unemployability. This is true about other real-life factors as well. Take the reliability of police services, a sub-component of "institutions", in which India has consistently done well lately. The question asked to executives - in India, it was the Confederation of Indian Industries that partnered the WEF for this survey - in this regard is: "In your country, to what extent can police services be relied upon to enforce law and order?" Similarly, on the count of "judicial independence", the question asked is: "In your country, how independent is the judicial system from influences of the government, individuals, or companies?" It is not difficult to imagine how the answers to several such questions - executives were asked to provide a rating on a scale of one to seven - may differ when the respondent is not a senior executive of a large successful company in India.