| Even as the Modi government completes 100 days in power, promising further steps to revive its economy and the ease of doing business in the country, the latest annual global competitiveness list reflects the dismal state of the economy. Weighed down as it is by challenging economic conditions for most part of the past year, India has slipped to 71st position (among a total of 144 countries) -- the lowest among BRICS countries -- in the competitiveness list, where Switzerland remains on top.
"Continuing its downward trend and losing 11 places, India ranks 71st. The country's new government faces the challenge of improving competitiveness and reviving the economy, which is growing at half the rate of 2010," WEF said.
As the annual list, released on Wednesday (3 September) by Geneva-based World Economic Forum (WEF), reveals, the Modi government has its work cut out. According to the report, India's slide in the competitiveness rankings began in 2009, when its economy was still growing at 8.5 per cent (it even grew by 10.3 per cent in 2010). "Back then, however, India's showing in the GCI was already casting doubt about the sustainability of this growth.
"Since then, the country has been struggling to achieve growth of 5 per cent. The country has declined in most areas assessed by the GCI since 2007, most strikingly in institutions, business sophistication, financial market development, and goods market efficiency," it added.
India's ranking in global competitiveness index used to be 48th in 2007-08 (three quarters of which fell in calendar year 2007). This slipped to 50 points a year later and has deteriorated.
In terms of official calculation of gross domestic product, India's economic growth declined to 4.7 per cent in 2013-14 against 8.9 per cent in 2010-11.
Sustained Rebound Unlikely Soon
The optimism from recent GDP numbers notwithstanding, there is little hard evidence to support the idea that Asia's third-largest economy is heading for a broader and sustained rebound anytime soon.
India's economy grew 5.7 per cent in the June quarter compared with a year earlier, the strongest pace in 2-1/2 years, accelerating from 4.6 per cent in the March quarter thanks to a rebound in industrial activity.
But the encouraging headline numbers masked the deeper malaise gripping the economy, which is being hobbled by slack consumption, weak business investment, creaking infrastructure and painfully slow structural reforms, economists say.
"The uptick in GDP growth was mainly driven by front-loading of government expenditure," says Izumi Devalier, an economist with HSBC in Hong Kong. "A curtailment in expenditure will make it challenging to sustain this pace of growth."
Much of the growth in the last quarter came from robust government spending, the pace of which could slow down as Finance Minister Arun Jaitley seeks to stick to this year's ambitious fiscal deficit target of 4.1 per cent of gross domestic product.
A pickup in private spending could help offset the slowdown in government spending. But stubborn inflation, which at nearly 8 per cent is too high for the Reserve Bank of India to cut policy rates, and weak employment are hurting consumers.
The HSBC purchasing managers' index (PMI) for manufacturing in August showed no improvement in employment or inflation, clouding the consumer outlook.
A late monsoon and coal supply crunch that has depleted fuel supplies to just six days of forward cover at India's thermal power stations could undermine rural spending and constrain output at energy-intensive businesses.
China Improves Position
China, which has improved its position by one place to 28th spot, leads the BRICS grouping, among which India has the least ranking. Russia is ranked at 53rd position, followed by South Africa (56) and Brazil (57).
"India's decline of 11 places to 71st, set against the gains of the ASEAN 5 countries, suggests that the competitiveness divide South and Southeast Asia is becoming more pronounced," WEF said.
As per the Global Competitiveness Report 2014-15, Switzerland is the most competitive economy, followed by Singapore and United States.
Other countries in the top ten are Finland (4), Germany (5), Japan (6), Hong Kong SAR (7), Netherlands (8), United Kingdom (9) and Sweden (10).
Besides India, WEF said that some of the world's largest emerging market economies continue to face difficulties in improving competitiveness. These include
Saudi Arabia (24th rank), Turkey (45), Mexico (61), Nigeria (127th), South Africa and Brazil -- all of them have slipped in their rankings.
Noting that improving competitiveness would yield huge benefits for India, WEF said it would help re-balance the economy and move the country up the value chain ensuring more solid and stable growth.
"This in turn could result in more employment opportunities for the country's rapidly growing population," it added.
WEF further said that India needs to create a sound and stable institutional framework for local and foreign investors as well as improve connectivity.
The rankings are based on WEF's Global Competitiveness Index (GCI) which is based on scores covering 12 categories.
They are institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.
"The strained global geopolitical situation, the rise of income inequality, and the potential tightening of the financial conditions could put the still tentative recovery at risk and call for structural reforms to ensure more sustainable and inclusive growth," WEF Founder and Executive Chairman Klaus Schwab said.
As per the report, there is uneven implementation of structural reforms across different regions and levels of development as the biggest challenge to sustaining global growth.
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