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India climbs three spots to 41 on IMD’s competitiveness rankings

India improves overall performance, image and managerial practices, but has a long way to go on education, health


Photo: Priyanka Parashar/Mint
Photo: Priyanka Parashar/Mint

New Delhi: India climbed three spots and China dropped an equal number of places in the 2016 rankings released on Monday by the International Institute for Management and Development (IMD)’s World Competitiveness Center.

India moved up the ranking from 44 in 2015 to 41 while China slipped from 25 to 22 in a survey of 61 nations.

India improved its overall performance, image, openness, and managerial practices, but remains bedevilled by rising social disparities due to the neglect of investments in education, health, and environment during the last two years, according to the Lausanne-based centre.

“India now ranks 26th in terms of image, 11th in openness and 32nd in managerial practices,” Jose Caballero, a senior economist at the IMD, said.

“Among the BRICS (Brazil, Russia, India, China, and South Africa) economies, India has done pretty well,” he added.

But India has a long way to climb the competitiveness ladder in education, health, and environment.

“Clearly, the government has not provided adequate investments in these three areas,” Caballero said.

The current high economic growth of India is no guarantee of its overall competitiveness, the IMD said. Also, the government has to provide resources for the social sector or risk seeing social disparities widen in the coming years, Caballero cautioned.

The IMD’s world competitiveness rankings are regarded as an important barometer for assessing the competitiveness of countries. The 2016 rankings cover 61 countries from both industrialized and developing regions. Each ranking is based on an analysis of over 340 criteria derived from four principal factors—economic performance, government efficiency, business efficiency and infrastructure.

Hong Kong ranks first in the competitiveness scoreboard, followed by Switzerland, the US, Singapore, Sweden, Denmark, Ireland, the Netherlands, Norway and Canada. China dropped from 22nd to 25th place this year, but it remains the main destination for foreign direct investments.

“The common pattern among all of the countries in the top 20 is their focus on business-friendly regulation, physical and intangible infrastructure and inclusive institutions,” said Professor Arturo Bris, director of the IMD World Competitiveness Center.

During 2015 and 2016, India’s performance has been mixed, according to Calberro. For example, India made improvements in its ranking of exchange rate stability, current account balance, government budget surplus/deficit, bribery and corruption, bureaucracy, tax evasion, ease of doing business, future energy supply, pension funding, student mobility, energy infrastructure, availability of computers on a per capita basis, transparency, green technology solutions, and researchers and scientists.

The “declines” in India’s performance, according to IMD’s competitiveness centre, include consumer price inflation, total public expenditure on education, collected tax revenues, export of goods, which dropped to $267.15 billion this year from $317.38 billion in 2015, consumption tax rate, female labour force, stock market labour capitalization, start-up procedures, business expenditure on research and development, overall productivity, risk of political instability, and real corporate taxes.

IMD has placed India at 16th rank in economic performance which is based on the performance of the domestic economy. International trade improved by one position from 45th to 44th, international investment (largely portfolio investments) from 31st to ninth, and employment ninth to fifth. In terms of prices, it fell from 37th to 55th.

The ranking for government efficiency has remained unchanged at 47th over the past three years. The main determinants for government efficiency include public finance, fiscal policy, institutional framework, business legislation, and societal framework.

In contrast, business efficiency improved to 31st rank this year, compared with 33rd position last year. The improvements in business efficiency include management practices, which improved from 47th position last year to 36th this year, attitudes and values from 23rd position to 18th, and labour market.

India’s performance in improving infrastructure, which ranks 58th over the last two years, remains a negative, particularly in areas of technological infrastructure, health and environment, and education. India dropped seven places from 38th to 45th in technological infrastructure, remained stable in scientific infrastructure at 33rd, and retained the bottom position in health and environment, and education.

“In infrastructure, there is a steady decline from 53rd position in 2012 to 58th in 2016,” said Cabellero. “The alarming drop in education by 11 places is quite significant with long-term consequences,” he said. “Total expenditure in education has dropped 11 places—from 44th to 55th position—and in health, India remains at the bottom,” Cabellero said.

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