India has slipped 10 places to rank 68th on an annual global competitiveness index, largely due to improvements witnessed by several other economies, while Singapore has replaced the US as the world’s most competitive economy.

India, which was ranked 58th in the 2018 Global Competitiveness Index compiled by Geneva-based World Economic Forum (WEF), is among the worst-performing BRICS nations along with Brazil (ranked even lower than India at 71 this year).

Announcing its latest index, the WEF said on October 8 that India ranks high in terms of macroeconomic stability and market size, while its financial sector is relatively deep and stable despite the high delinquency rate, which contributes to weakening the soundness of its banking system.

How is the index prepared?

The Global Competitiveness Index (GCI), which was launched in 1979, maps the competitiveness landscape of 141 economies through 103 indicators organised into 12 themes. Each indicator, using a scale from 0 to 100, shows how close an economy is to the ideal state or “frontier” of competitiveness. The pillars, which cover broad socio-economic elements are: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, product market, labour market, the financial system, market size, business dynamism and innovation capability.

Why did India’s rank drop this year?

India is ranked high at 15th place in terms of corporate governance, while it is ranked second globally for shareholder governance, the WEF study showed. In terms of market size, India is ranked third, while it has got the same rank for renewable energy regulation.

Besides, India also punches above its development status when it comes to innovation, which is well ahead of most emerging economies and on par with several advanced economies, the report said.

But, these positive metrics contrast with major shortcomings in some of the basic enablers of competitiveness in case of India, the WEF said, while flagging limited ICT (information, communications and technology) adoption, poor health conditions and low healthy life expectancy.

The healthy life expectancy, where India has been ranked 109th out of total the 141 countries surveyed for the index, is one of the shortest outside Africa and significantly below the South Asian average.

Besides, India needs to grow its skills base, while its product market efficiency is undermined by a lack of trade openness and the labour market is characterised by a lack of worker rights’ protections, insufficiently developed active labour market policies and critically low participation of women.

With a ratio of female workers to male workers of 0.26, India has been ranked very low at 128th place. India is also ranked low at 118th in terms of meritocracy and incentivisation and at 107th place for skills.

In the overall ranking, India is followed by some of its neighbours, including Sri Lanka at 84th place, Bangladesh at 105th, Nepal at 108th and Pakistan at 110th place.

The WEF said the drop of 10 places in India’s position to 68th place may look dramatic, but the decline in the country’s competitiveness score is relatively small. A number of similarly-placed economies including Colombia, South Africa and Turkey improved over the past year and hence have overtaken India.

The top performers

With a 2019 GCI score of 84.8 out of 100, Singapore is the country closest to the frontier of competitiveness. The country ranks first in terms of infrastructure, health, labour market functioning and financial system development. Going forward, in order to become a global innovation hub, Singapore will need to promote entrepreneurship and further improve its skills base.

Among the G-20 countries, the US (2nd), Japan (6th), Germany (7th) and the UK (9th) feature in the top 10, but they all have experienced erosion in their performance.

Among BRICS members, China is by far the best performer, ahead of Russia, 32 places ahead of South Africa (60th) and some 40 places ahead of both India (68th) and Brazil (71st).

Led by Singapore, the East Asia and Pacific region is the most competitive in the world, followed by Europe and North America.

Economic slowdown looms

As the shadow of a recession looms large, the global economy is predicted to be heading for a slowdown. Over the past decade, growth in advanced economies has been anaemic. Many emerging economies, including Argentina, India, Brazil, Russia and China, are experiencing some slowdown or stagnation.

As innovation capacity grows in emerging economies such as China, India and Brazil, they need to strengthen their skills and labour market to minimise the risks of negative social spillovers.

The WEF said 10 years on from the global financial crisis, the global economy remains locked in a cycle of low or flat productivity growth despite the injection of more than $10 trillion by central banks.

World Economic Forum

The World Economic Forum is the international organisation for public-private cooperation. It engages the foremost political, business, cultural and other leaders of society to shape global, regional and industry agendas.

It was established in 1971 as a not-for-profit foundation and is headquartered in Geneva, Switzerland. It is independent, impartial and not tied to any special interests. The Forum strives in all its efforts to demonstrate entrepreneurship in the global public interest while upholding the highest standards of governance. Moral and intellectual integrity is at the heart of everything it does.