06 November 2009

India - as competitive as ever

The World Economic Forum has come out with the “India Competitiveness Review 2009″ a few hours back. India ranks 49th out of 133 economies in the Global Competitive Index 2009-10, up one rank from last year’s index. Here are some key findings of the Competitive Index of India:

“The country very much underperforms in the Health
and Primary Education Pillar (101st). The sanitary
situation is particularly alarming, with some indicators
comparing unfavourably even with the sub-Saharan
Africa region. Both the quality and quantity of
education are insufficient. India has been running
cavernous deficits, weighing heavily on its
performance in the Macroeconomic Stability Pillar
(96th). Energy and transport infrastructures are in a
state of disrepair (76th). In this context, India’s rank of
54th for the quality of institutions is encouraging,
although corruption and security remain major issues.
India’s performance in the second Subindex,
Efficiency Enhancers, is better, albeit uneven. This
Subindex accounts for 35% of India’s GCI score and
is of particular importance to the development of the
industry and services sectors. The country boasts a
developed financial system (16th) with a particularly
sound banking sector (25th). Another competitive
advantage is the size of its market (4th overall). The
Indian goods market is also fairly efficient (48th)
thanks to fierce competition and despite the
presence of important barriers to entry. On a more
negative note, the difficulty of hiring and firing
employees makes the labour market rigid (83rd). The
country’s technological readiness (83rd) continues to
be held back by low penetration rates for
information and communications technologies.
Firms, however, are generally adept at adopting and
using the latest technologies. Finally, higher
education in India (66th) is of relatively good quality,
but access to it remains a privilege of the few.
Compared with the mixed performance in the other two
Subindexes, India’s showing in the two most complex
areas of competitiveness, Business Sophistication
(27th) and Innovation (30th), is truly remarkable. This
reflects, to a large extent, the brisk development of
India’s private sector and of a few industries in
particular. Yet, at present, these two categories
account for just 5% of the overall GCI score because
they are not yet the engine of India’s productivity.
To place India’s performance in context, the authors
draw parallels with a number of countries and
country groups. The analysis reveals that India lags
behind almost all comparators in the areas of health
and primary education, labour markets,
technological readiness and macroeconomic
stability. China ranks ahead of India in 10 out of the
12 Pillars – often by a wide margin. However, India
possesses a number of competitive advantages in
several Pillars, namely Institutions, Financial Market
Sophistication, Market Size, Business Sophistication
and Innovation.

The only substantial positives come from the financial sector. How long can be have efficient finance but a hobbled and restrained real economy?

The India Competitiveness Review 2009 is linked.

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