India static in world competitiveness list

India may have moved up on AT Kearney’s index of attractive destinations for foreign direct investment, but it remains stuck where it was last year so far as the World Economic Forum’s (WEF) competitiveness indices are concerned.

On the growth competitiveness index, which aims to gauge an economy’s ability to achieve sustained growth over medium to long term, India has improved its position marginally to 55. It was at the 56th position last year.

On the business competitiveness index, which evaluates microeconomic conditions defining the current sustainable level of productivity, India is at the 30th position, same as last year.

India has done poorly on all the three constituents of the growth competitiveness index: the quality of the macroeconomic environment, the state of public institutions and technological readiness.

The WEF report mentions specifically that India is one of the countries that have been penalised for running large deficits.

India’s much-touted technology “superpower-in-waiting” image also gets a jolt: it is ranked below China on the ICT sub-index (79 versus 62). In other words, India’s software prowess is being dwarfed by China’s impressive strides in hardware, broadband and mobile phone networks.

On the positive side, India is less corrupt than China and ranks 80th, twenty slots below China. When it comes to problems faced while doing business in a country, around 16 per cent of respondents list this as a problem in India compared with 15 per cent in the case of China.

Although India’s ranking on the growth competitiveness index has improved by a notch, the gap between China and it has come down since the last year. While China was 12 slots ahead in 2003, the lead narrowed to nine in 2004.

The report suggests that foreign investors base their decisions more on macro-fundamentals and not on immediate business environment. The actual experience, however, does not bear this out.

Nearly 25 per cent of those surveyed list India’s inadequate infrastructure as a problem compared with just 12 per cent in the case of China.

India’s level of education is much better than China’s. While 7 per cent of those surveyed see the inadequately educated workforce in China as a problem, only 1 per cent believe this is a cause of concern when doing business in India.

Policy instability is seen as a problem in China by 15 per cent of the respondents. In India, policies are seen as more stable, and just 5 per cent list this as a problem.