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India’s rise in Global Competitiveness Rankings: what the numbers mask
India's relative distance from the most competitive economies in the world has actually increased since 2006 when its rank was 43
Mumbai: Don’t pop the champagne yet. India’s rise in the World Economic Forum’s (WEF’s) global competitiveness rankings —by 16 spots to 55—masks two things.
One, India’s relative distance from the most competitive economies in the world has actually increased since 2006 when its rank was 43.
Two, India has performed better in survey-based sub-indicators (which generally measure sentiment or opinion) rather than quantitative sub-indicators when compared with last year’s rankings.
Sure, perception and sentiment matter and do play an important role in investment decisions, but what emerges from these two facts is simply the inference that India is no better off than it was eight years ago; only, it’s perceived to be a more competitive economy now.
According to World Economic Forum’s methodology, a country’s overall competitiveness score is based on its performance in 12 so-called pillars such as quality of institutions, infrastructure, macroeconomic environment and so on. (These 12 pillars are made up of 114 sub-indicators.) As Chart 1 shows, India’s competitiveness score compared with the top-ranked country is worse in almost all pillars than in 2006.
The deterioration is most pronounced in goods market efficiency, technological readiness and business sophistication. For instance, in 2006, India’s competitiveness in the goods market efficiency pillar was 87% of the top scorer (Sweden), but it fell to 67% of the topper (Singapore) in 2015.
Simply put, while India has clawed its way up in the comity of nations, the leader in each category has pulled away.
To be sure, chart 1 also shows that competitiveness scores in most pillars has improved when compared with last year. But it is important to note that this seems to be primarily owing to better performance in the survey-based indicators—which generally measure sentiment or opinion on various issues such as “judicial independence” or “capacity for innovation”.
About 70% of the 114 sub-indicators are sentiment-based and taken from the WEF’s Executive Opinion Survey. The rest are quantitative indicators such as “mobile-broadband subscriptions per 100 persons” or “education enrolment ratio”. As Chart 2 shows, India’s 2015 rankings are much better for survey-based indicators.
For instance, in pillar 6 of the competitiveness index, which measures goods market efficiency, India’s ranks in the survey-based sub-indicators range from 26 to 101 whereas ranks for quantitative indicators range from 110 to 129 (out of total 140 countries).
The number-based indicators where India is ranked highly are typically related to market size. India ranks third in the three sub-indicators of domestic market size, foreign market size (i.e. size of India’s exports market) and size of economic output.
Overall, while two-thirds of the 80 survey-based sub-indicators improved for India in 2015 compared with a year ago, only half the 34 number-based sub-indicators did.
Can India translate the positive sentiment, as evident in the Executive Opinion Survey (which was conducted between February and June 2015), into tangible progress on the ground?
That’s the question.
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Business NewsPoliticsPolicyIndia’s rise in Global Competitiveness Rankings: what the numbers mask
First Published:30 Sep 2015, 05:05 PM IST
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