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global competitiveness and india: current

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 GLOBAL COMPETITIVENESS AND INDIA:
CURRENT TRENDS AND OPPORTUNITIES
1
Syed Rizwan Naqvi

ABSTRACT

Global Competitiveness report published by World Economic Forum (WEF) provides an overview of competitive
performance of around 140 economies and ranks (indexes) each country on the basis of its global
competitiveness on annual basis .Individual rank (index) of each country is known as Global Competitive Index.
The assessment of global competitiveness is done on the basis of 3 main categories –Basic Requirements
category, Efficiency Enhancers category and Innovation & Sophistication category out of which Basic
Requirements consists of four pillars, Efficiency Enhancers consists of six pillars and Innovation &
Sophistication consists of two pillars .Each of these pillars consists of sub indexes on the basis of which ranking
of each country is done. On trend analysis of Global Competitiveness of India, it is found that current trends in
innovation growth in India is imminent but India is lagging behind in Basic Requirements and Efficiency
Enhancers . By combining Global Competitiveness reports of previous decade, the paper aims to analyze the
areas of improvement in which India is lagging behind other countries in the past few years.

Keywords: Global Competitiveness; Innovation

I. INTRODUCTION

Concept of globalization was introduced by Adam Smith father of Modern Economics in 1776 through the book
titles ―wealth of Nations‖. Global business was part of ancient India as India was actively involved in trade
business with China, Nepal and other neighboring countries. While performing global business, countries were
in a race to outperform each other in order to gain to the maximum profit. In order to evaluate each country in
terms of its competitiveness, world economic forum (initially known as European Management Forum) , a non-
profit foundation based in Geneva ,Switzerland took an initiative in generating annual comprehensive report
(WEF Global Competitiveness Report) depicting competitiveness of each country out of around 140 countries .
Depending upon competitiveness, each country is awarded rank known as Global Competitiveness Index.
The entire evaluation of global competitiveness of individual countries is based on 12 pillars broadly out of
which first four pillars fall under the category of Basic Requirements ,next 6 pillars fall under Efficiency
Enhancers category and remaining 2 pillars belong to Innovation and Sophistication factors. All the twelve
pillars are further broken down into further sub pillars for which evaluation of each country is performed .Either
Expert Opinion Survey(EOS) is sought for evaluation of that category otherwise data is taken from world Bank
or international telecommunication union or international monetary fund or united nations (UN) data base .

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Different countries are in different stages of development which is basically determined by two criteria ----one
is level of GDP per capita as per market exchange rate, which is the total output divided by the number of
people in the population which gives a figure of the average output of each person, i.e., the average amount of
money each person makes and the other criteria is extent to which countries are factor driven. Table 1 explains
the criteria for evaluation of each country in terms of broad three categories of global competitiveness on the
basis of GDP per Capita.
Table 1. Table showing sub index weights and income thresholds for stages of development
Stage of Development

Stage A Stage B Stage C Stage D Stage E

GDP Per Capita ( US $ <2000 2000-2999 3000-8999 9000-17000 >17000
Thresholds)
Wt for Basic Requirements 60% 40-60% 40% 20-40% 20%

Wt fro efficiency Enhancers 35% 35-50% 50% 50% 50%

Wt for Innovation and Business 5% 5-10% 10% 10-30% 30%

Sophistication Factors

Stage A -Factor Driven

Stage B -Transition from Stage A to Stage C
Stage C -Efficiency Driven
Stage D -Transition from Stage C to Stage E

Figure 1: Annual Trends of GDP per Capita of India: 2006-2016

Stage E -Innovation Driven
As per Fig. 1 GDP per capita of India(As per data taken from world bank record of India‘s GDP per capita) is
1805 USD , so falls under factor driven stage of development (Stage A) thus GCI(Global Competitiveness
Index) is calculated as per Table 1 where 60% weightage is given to Basic Requirements category ,35 % to
Efficiency Enhancers category and 5% weightage is given to innovation and business sophistication category .

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II. RESEARCH METHOD

Research method used in research paper is time-series analysis on qualitative basis. Unique input data is taken
from annual reports generated by WEF (World Economic Forum) for calculating global competitiveness of
different countries. In the research paper focus is made on current trends prevalent in India as far as global
competitiveness is concerned. As the data is taken from annual reports, so year wise data is taken for analyzing
the trends. The trend component refers to the data's gradual shifting over time. It is often shown as upward- or
downward-sloping discrete lines to represent increasing or decreasing trends, respectively.
III. STUDY
Trends in GCI (Global Competitiveness Index

Figure 2 : Global Competitiveness index, 2006-2016

As can be seen in Fig. 2 , India‘s GCI (Global competitiveness Index) ranking is continuously showing
downward trend from 42nd rank (2006-07) to 50th rank(2008-09) ,slight jump in ranking to 49th rank in 2009-10
and then continuous downward trend from 49th rank(2009-10) to 71st rank(2014-15). In 2015-16 , India ranks 55
moving ahead by 16 points as compared to 71st attained in 2014-15 .No member of SAARC ( South Asian
Association for Regional Cooperation ) features in top 50 ranking of GCI. India is leading among SAARC
countries by getting a rank of 55 followed by Sri Lanka(68 th ) ,Nepal(100th ), Bhutan(105th ) , Bangladesh(107th )
and Pakistan(126th ) . The rise in GCI ranking of India can be attributed to recent economic recovery,
improvement in macroeconomic environment and slight improvement in infra structures and quality of India‘s
institutions.

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 Trends in Basic Requirements Category

Figure 3: Annual Trends in Basic Requirements Category, 2006-16

Basic Requirements Category consists of four pillars—Institutions, Infra structure, Macro-economic

environment and health & primary education. Fig. 3 depicts annual trend for India‗s ranking in Basic
Requirements Category. In basic requirements category, India is showing downward trend from 60th rank(2006-
07)) to 80th rank(2008-09),slight improvement to 79th rank(2009-10),then again downward trend from 79th rank
(2009-10) to 91st rank(2011-12) ,again slight improvement to 85th rank(2012-13) and sudden drop to 96th
rank(2013-14)and finally slight improvement from 96th rank (2013-14) to 80th rank(2015-16) .India has
improved its ranking in quality of institutions jumping from 72 nd rank ( 2013-14) to 60th rank(2015-16) .
In Institutions pillar , there is rising trend (60th rank ,up 10) .On further analysis of sub indexes of institutions
pillar ,India is showing rising trends in diversion of public funds(40th ,up 20), Intellectual Property
Protection(50th ,up 15), public trust in politicians(31st ,up 19), irregular payments and bribes(63rd ,up 30),
favoritism in decisions of government officials(32nd ,up17), burden of government regulation(27th ,up32)
,efficiency of legal framework in settling disputes(42nd , up 15) , strength of investor protection(6th ,up
28),transparency of government policy making (58 th, up 6) and ethical behavior of firms(44th ,up 44) . India is
showing poor ranking in reliability of police services(86th ,up 2) , organized crime(114th ,down 5),business costs
of crime & violence(98th ) ,business costs of terrorism(126th,down 1) ,judicial independence(64th,down
14),protection of minority shareholders interests(69 th , up 7) and wastefulness of government spending(51st
,down 2) .
In infrastructure pillar, it has improved to 81st (up six) but still it remains major growth bottleneck. On analysis
of infrastructure pillar, it is found that quality of railroad infrastructure (29 th,down 2 ) ,quality of port
th st
infrastructure(60 , up 16) is showing rising trend whereas quality of roads (61 ,up 15), quality of air transport
infrastructure (71st ),quality of overall infrastructure (74th,up 16).quality of electricity supply(98th , up 5),fixed

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telephone lines/100 population (116th,up 2),mobile telephone subscriptions/100 population (121 st ) need to be
focused .
In macroeconomic environment, India has improved its ranking from 110 th (2013-14) to 91st (2015-16) but still
lot of scope exists for further improvement. In macroeconomic environment, government budget balance in
terms of percentage GDP (131st, down 2), inflation in terms of percentage change (105 th,up 28),general
government debt in terms of percentage GDP(103 rd ,up 7) needs special focus for enhancing positive
macroeconomic environment .
In health and primary education pillar , India has shown slight improvement from 102nd rank (2013-14) to 84th
rank(2015-16) but health and primary education needs are to be addressed by government .On analysis of
current trends in health and primary education , there is sharp improvement observed in business impact of
malaria from 112th rank(2013-14) to 60th rank (2015-16) and malaria cases /100,000 population from 116th rank
(2013-14) to 44th rank (2015-16) . Business impact of tuberculosis (132nd,up 3),tuberculosis cases/100,000
population (113th ) ,business impact of HIV/AIDS(130th ,up 2),HIV prevalence in terms of percentage adult
population (63rd,down 4) , infant‘s mortality in terms of deaths /1000 live births (114 th, up 1) , life expectancy
in terms of years (107th, up 3),quality of primary education (52nd , up 36) and primary education enrollment in
net percentage (77th ,up 1) needs to be addressed on priority due to poor ranking in all the above sub indexes.
Trends in Efficiency Enhancers Category

Figure 4: Annual Trends in Efficiency Enhancers Category, 2006-16

Efficiency Enhancers category consists of six pillars---Higher Education and Training, Goods Market
Efficiency, Labor Market Efficiency, Financial Market Development, Technological readiness and Market size.
On trend analysis of Efficiency Enhancers category for India, India is showing slight improvement from 2006
(33rd )to 2008(31st ),then gradual decline from 2008(31st) to 2011(38th) ,little rise by one rank in 2011-12 to
37th rank , then declining trend from 2012(37th) to 2015 (61st)with jump by 3 ranks in 2015-16(58th).

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In Higher education and training pillar, India is lagging in secondary education enrollment in gross percentage
(105th ,up 1),Tertiary education enrollment in gross percentage (86 th ,up 1),quality of math and science
education (sharp fall from 30th rank in 2012-13 to 63rd rank in 2015-16,quality of management schools (55th
,up1 ),internet access in schools (100 th ,13 down),availability of research and training services (68 th,4
down),extent of staff training (48th,29 up). Except extent of staff training, all other sub indexes are ranked more
In goods market efficiency ,India is showing downward trends from 36 th rank (2006-07) to 95th rank (2014-15)
and then 91st rank in 2015-16(up 4).In goods market efficiency pillar, Intensity of local competition (101 st,down
10), Number of procedures to start a business(129 th ,up 2),Number of days to start a business (110 th , down
4),agricultural policy costs(53rd,up 7),total tax rate in terms of percentage profits(123rd,up 7), prevalence of trade
barriers(82nd,up 18),prevalence of foreign ownership(96 th, up 2),business impact of rules on FDI(92 nd,up 1),
burden of customs procedures(54th,up 21),import as a percentage of GDP(116 th,down 4),trade tariffs in terms of
percentage duty (124th ) and degree of customer orientation(97th ,up 3) all occupy poor rank so need to be
addressed whereas sub indexes viz. buyer sophistication (26th ,up 12), extent of market dominance (41st,down
5) , effectiveness of anti-monopoly policy(41st,up 2) and effect of taxation on incentives to invest (38 th ,up3)
exist in top 50 ranking so they need not to be reviewed .
In labor market efficiency, India has shown rising trend from 96th rank (2006-07) to 83rd (2009-10), then falling
trend to 112th rank (2014-15) and finally jump to 103rd rank in 2015-16. In labor market efficiency pillar, co-
operation in labor employee relations (86th,up 4) ,hiring and firing practices (25 th , up 22),flexibility of wage
determination (120th, down 7) ,effect of taxation on incentives to work(36th , up 9),redundancy costs in terms of
weeks of salary(70th ,up 5),pay and productivity (47th , up 22),reliance on professional management (86 th,down
9),country capacity to retain talent (40th,up 2),country capacity to attract talent (40th,up 6),women in labor force
in terms of ratio to men (132nd ,up 1
In financial market development, India has shown rising trend from 38th rank (2006-07) to 16th rank (2009-10),
then downward trend to 21st rank (2011-13), slight jump to 19th rank (2013-14), then again falling trend to 53rd
(2015-16). In financial market development pillar , India has shown poor ranking in availability of financial
services (81st, up 2), soundness of banks (100th,up 1),regulation of securities exchanges (69th,down 7),legal
rights index(44th,down 15) and affordability of financial services (71 st ,up 2) where it has got ranking in top 50
list in financing through local equity market (45 th ,down 6),ease of access to loans (29th),venture capital
availability ( 13th, up 7) ,
In technological readiness, India is showing falling trend from 57 th rank (2006-07) to 121st rank (2014-15) and
then slight improvement to 120th rank (2015-16). In technological readiness pillar , all the sub indexes viz.
availability of latest technologies (108th , up 2),firm level technology absorption(102 nd),FDI and technology
transfer ( 95th ) ,individuals using internet in percentage (107 th,up 8),fixed broadband internet subscriptions/100
populations(104th , down 1),international bandwidth in terms of kb/user (116th, down 9),mobile broadband
subscriptions/100 populations(124th,down 10) show poor ranking more than 50 .
In market size , India is steadily maintaining a rank of 3 from 2006 to 2016 except for 5th rank in 2008-09 and
4th rank in 2009-11.On further analysis of market size pillar , domestic market size index (steady at 3rd rank)
,foreign market size index(3rd,up 1),GDP in PPP in dollar billions(steady 3 rd ) are placed at excellent positions
except exports as percentage of GDP(114th ,down 1).
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 Trends in Innovation and Sophistication Factors Category

Figure 4: Annual Trends in Innovation and Sophistication factors Category, 2006-16

Innovation and Sophistication factors consist of two pillars ---Business Sophistication and Innovation Pillar. On
current trend analysis of Innovation and Sophistication factors , it is found that in 2006-07 and 2007-08 ,
ranking of India was steady at 26, slight fall between 2008(26th rank) to 2010(28th rank), major fall to 42nd
rank in 2010-11,slight jump in 2011-12 to 40th rank , slight fall to rank 43rd in 2012-13 ,again slight rise to 41st
in 2013-14, slump by 11 ranks to 52nd rank in 2014-15 and then jump by 8 ranks to 46th rank in 2015-16.
In business sophistication factors, India has shown slight improvement from 57th rank (2014-15) to 52nd rank
(2015-16). On further analysis of business sophistication pillar, India is showing local supplier quantity(54th, up
18),state of cluster development(29th,down 2),nature of competitive advantage (47th , down 3),value chain
breadth (29th ,up14),control of international distribution (48 th,up 2) and willingness to delegate authority (56 th
,up 1).India needs to look into local supplier quality (66 th rank, up 12), production process sophistication (61st
rank, up 1) and extent of marketing (82nd rank, down 1).
As far as innovation factors are concerned , India lies in top 50 countries ,presently holding a rank of 42 nd (jump
of 7 ranks from previous year) .India has got excellent quality of research institutes(31st,down 1) , handsome
company spending on R&D(31st rank, down 1). India can improve upon capacity for innovation(50 th rank,
down 2), India has seen sharp jump in government procurement of advanced technological products from 61 st
rank (2014-15) to 26th (2015-16) .Although scientists and engineer‘s availability is falling from 45th rank (2014-
15) to 49th (2015-16) due to globalization and better opportunities prevailing in other countries. India needs to

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look into industry-university collaboration in R&D as it is struck at a rank of 50 for the last two years. PCT
(Patent Cooperation Treaty) in terms of patents applications/million population is, also, struck at 61 st rank for
the last two years.

IV. RESULTS AND ANALYSIS

On deep analysis of each pillar, the following points need to be concentrated for boosting global
competitiveness in India ----
a) Institutions --- India‘s rank in protection of property rights is dropped significantly in last two years which
need to be focused. Although India has improved its ranking in corruption, still investors think corruption and
policy instability as major hindrance for starting business.
b) Infrastructure –India needs to put into lot of investment on infrastructure particularly quality of electricity
supply and overall infrastructure.
c) Macroeconomic Environment- Government should look into Government budget balance ,inflation as well
as General Government debt .
d) Health and Primary Education –India should improve its ranking in health and primary education received
by population as infant mortality and life expectancy rank is quite low(>100). The lack of basic education and
proper well being of individuals may pose obstacle to business development.
e) Higher Education and Training – Performance of India in secondary and tertiary education in terms of
gross percentage as well as internet access to schools needs improvement.
f) Goods Market Efficiency-Number of days & procedures to start a business needs, import as percentage of
GDP needs to be improved for enhancing business growth.
g) Labor Market efficiency- India needs to look into restrictive labor regulations, poor work ethics in labor and
training of inadequately skilled workforce as these factors attribute to hindrance of congenial business
environment.
h) Financial market development-Due to low ranking of sub indexes in financial market development pillar
,access to finance has come out to be a major hindrance for doing business in India .
i) Technological readiness - It was the biggest surprise that India with large population of IT champions, its
performance in technological readiness is unsatisfactory. It needs attention as it is found to be amongst one of
the least connected countries holding a rank of 120th in 2015-16 which has come up by one position as compared
to the previous year.
j) Market size-India has got a huge market base inclusive of both domestic as well as foreign markets .Huge
market size is an opportunity for growth of business.
k) Business Sophistication –India needs to follow sophisticated business practices for achieving higher
efficiency in the production of goods.
l) Innovation –Technological innovations may lead to dramatic productivity gains. In the field of innovation,
growth of India is showing rising trend.

V. CONCLUSION

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 Since India is categorized as a factor-driven economy, India needs to focus more into Basic Requirements and
Efficiency Enhancers Category(95 percent weightage for calculation of Global Competitiveness Index) for
enhancing boost in global competitiveness ranking. As India is, already, performing quite well in innovation and
sophistication pillars, not many efforts are needed to push it to the top. The performance of India is exemplary
for devising effective innovation policy for other developing nations, so termed India as Innovation Achievers
by INSEAD Business School for the last two years in its global report for evaluation of Global Innovation
Indexing among 140 economies. India has, already, started several national level and state level schemes &
state-wise monitoring/evaluation for innovative growth among individual states and the entire nation.

REFERENCES

[1] Schwab, Klaus and Professor Xavier Salai-i-Martin. Global Competitiveness Report. Geneva: World
Economic Forum, 2015-16.
[2] Schwab, Professor Klaus and Professor Michael E Porter. The Global Competitiveness Report. Geneva:
World Economic Forum, 2008-09.
[3] The Global Competitiveness Report. Geneva: World Economic Forum, 2006-07.
[4] The Global Competitiveness Report. Geneva: World Economic Forum, 2007-08.
[5] Schwab, Professor Klaus and Professor Xavier Salai-i-Martin. The Global Competitiveness Report.
Geneva: World Economic Forum, 2014-15.
[6] The Global Competitiveness Report. Geneva: World Economic Forum, 2013-14.
[7] The Global Competitiveness Report. Geneva: World Economic Forum, 2011-12.
[8] The Global Competitiveness Report. Geneva: World Economic Forum, 2010-11.
[9] The Global Competitiveness Report . Geneva: World Economic Forum, 2012-13.
[10] The Global Competitiveness Report . Geneva: World Economic Forum, 2009-10.

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