Near the middle in competitiveness for 25 years, this is where India must focus

India is only able to keep pace with its peers and not better its economic performance to a higher sphere.

Where does India stand in terms of economic competitiveness? It might seem a rude question to ask when the government, and many economists, a large number of them direct or indirect supporters of the NDA government, are quite satisfied that India is doing well and it will be among the top three economies of the world by around 2030.

Chief Economic Advisor to the Government V Anantha Nageswaran told a Confederation of Indian Industry (CII) meeting in Lucknow that the Indian economy is an autopilot and it will grow at 7 percent per annum for the next decade because the government has done enough for the momentum to be maintained.

The state of the Indian economy has also to do with its quality, and a key element is how competitive the Indian economy is. In the Swiss-based Institute of Management Development report of World Competitiveness Index 2023, India stands at 40 out of 64 countries.

The Big Picture

This is an overall ranking based on four criteria: economic performance, government efficiency, business efficiency and infrastructure. And apart from factoring the numbers of the economy – annual growth rate, unemployment rate, exchange rate, and foreign fund inflows and outflows – the ranking is based on a survey of company executives at the middle and higher levels, both Indian and expatriates – the condition for expatriates is that they should have stayed in the country for more than a year – and from all sectors of the economy.

India’s ranking was 37 in 2022 and it attracted Indian media attention as an improvement from the 43rd rank in 2021. In the past five years, India’s ranking in the index stood at: 43 in 2019, 2020 and 2021, 37 in 2022 and 40 in 2023. It shows that India is in the middle band or the lower third of the 60 plus countries that have been surveyed. These surveys give only a broad view of the state of affairs and they should be taken as evidence of the big picture.

On the axis of economic performance, India stood at 24 in 2019, 37 in 2020 and 2021, 28 in 2022 and 33 in 2023. In terms of government efficiency, India ranked 46 in 2019, 50 in 2020, 46 in 2021, 45 in 2022 and 44 in 2023. On the axis of business efficiency, India was 30 in 2019, 32 in 2020 and 2021, 23 in 2022 and 28 in 2023. And in infrastructure, India was 55 in 2019, 49 in 2020, 2021 and 2022 and 52 in 2023.

What Rankings Say

The fluctuation in the rankings shows that there has not been much stability in the workings of the economy at various levels. This need not be a dampener, but it will be a useful guide to making the course corrections in the different segments. Progress is a slow process and it is not to be mocked at.

It is unfair to judge the state of the Indian economy on strict criteria from 2019 to 2023 which coincides with the second term of the Modi government because of the Covid-19 disruption in 2020 and 2021, and the war in Ukraine in 2022. The second term of Prime Minister Modi has been an economically stressful period in India and in the world.

But looking at the World Competitiveness Index at five-year intervals from 1997 shows that India has been hovering around the middle and lower-third level in its overall ranking for the past 25 years, and 2007 was the exceptional year when India ranked 27. In 1997 and in 2002 India’s overall ranking in the Competitiveness Index was 41, 35 in 2012 and in 2017.

Prosperity And Competitiveness

These years span the governments of Atal Bihari Vajpayee, Mamnohan Singh and Narendra Modi, and it shows that the three governments are still in a struggling phase. The rankings issue is much more than a numbers game. It indicates the challenges that the Indian economy faces over the years, and they spread across a wide spectrum.

The thinking in the last 25 years has been that economic growth is the key factor to improve the country. But it looks like growth alone might not bring about the miracle. Arturo Bris, director of the World Competitiveness Centre (WCC) makes a valid observation: “A country’s ability to generate prosperity for its people is a key determiner of success. It’s not what China does yet and it’s not what the US does fully yet.”

That is a telling comment on the two top economies, with the US ranking ninth in the rankings for competitiveness and China at 21. So, competitiveness has a qualitative edge in the form of these rankings. It is not who is the richest and who is the largest. This should provide a different perspective while looking at the Indian economy at large. Competitiveness should deliver not just growth but many other things, including prosperity for the people.

Parsa Venkateshwar Rao Jr is a New Delhi-based journalist. Views are personal, and do not represent the stand of this publication.