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Competitiveness of India’s Economy

Introduction

The word ‘competitiveness’ in economy represents the capacity and economic performance of a country to sell and supply goods and services in a given market compared to other countries in the same market. As defined by world economic forum, who is also responsible for the ranking of nations based on competitiveness since 1979 as, “the set of institutions, policies and factors that determines the level of productivity of a country”. The very definition of competitiveness varies with the given context and field of research. (Porter 1990) states nation’s Competitiveness depends on the capacity of its industry to innovate and advancement. Companies gain advantage from its world’s competitors due to pressure and challenge. Competitiveness is a major issue but it is not well defined (Martin et al. 1991) but it still remains the important means of measuring economic performance of an economy (Dunning 1998).

In last decade the world has witnessed an economic slowdown, but in last few years there is a sign of slow but steady growth which is likely to continue with a predicted 3.5% in growth. In any case, we are living in a period of remarkable change and vulnerability. A paradigm shift in international development such as rapid technological change, forcing world leaders to recalculate the effectiveness and consequences of their political and economic policies. As far as continuous growth is concerned, the future in not guaranteed at all. Based on the ability to sustain inclusive growth ‘world economic forum’ has indexed 137 nations, which is also called ‘Global competitiveness index’. In the ranking inclusive growth reflects positive growth that benefits citizens as well as environment. 12 markers have been used in the assessment of competitiveness including innovation, infrastructure and macroeconomics. The relation between innovation and readiness to absorb new technology plays an important role in overall performance of the nation, also the resilience of economy and strong labour market are important.

The recent Competitiveness Report do put some confidence in the future, but it also points some impending problems. Two major concerns are unregulated growth of capital markets and ever growing private debt in developing economies. In the report some developing country such as India has performed very good in the field of innovation but failed to capitalize the growth in absence of readiness populations and businesses to adopt new technology. Extra efforts are required to prepare economy to perform in a symbiotic manner. Similarly many economies have performed well in labour market flexibility, but unbalanced  work protection is acting as a obstacle in overall all performance.

Despite of arguments by the economist and authors, Concept of competitiveness of national economy is largely accepted in recent times by most developed and developing nations. It is important for human development and well-being of citizens. It creates opportunity to develop infrastructure for better education, health, security and economic prosperity. Yet it should not be limited to just few economies, it should contribute for the greater good of mankind. The measurement of competitiveness of economy should include factors such as broad-based distribution of economic gains, environmental sustainability, and intergenerational equity for young people and future generations. Hence achieving a resilient economy and prosperity for everyone.

2. Measuring competitiveness

Competitiveness measurement is highly vague with respect to various methods utilised by agencies. However, there are fundamental indicators which is mainly considered by most of them and specifically by world economic forum: Basic requirements, efficiency enhancers and innovation & sophistication. These areas are assessed on a national outcome of policies over the period and quality. Results are combined and aggregated with weightage on various parameter to find the competitiveness. 12 parameters has been used by World economic forum to assess the competitiveness of a region(Schwab and Sala-i-Martín 2017)

Basic requirements

  1. Institutions assessment gives insights to the public and private policies which clarifies the status of judiciary independence, protection to property rights, business security, efficiency of administration and justice, ethics related to business.
  2. Infrastructure assessment involves assessment of quality and availability of transport, electricity and network facilities.
  3. Macroeconomic environment tells about the monetary policy of the nation, sovereign debt condition, interest rates and fiscal deficits. Stability of this environment is important on the view of business and strongly contributes to the competitiveness.
  4. Health & primary education conditions of nation illustrates the investments on health services and how it keeps the citizens healthy and ready for work increasing the attractiveness to business investors. Also, primary education builds a workforce of efficient and skills.

Efficiency enhancers

  1. Higher education and training parameter explores the status of quality and quantity of education in the region. Opportunities of on the job training for skill development is also assessed.
  2. Goods and market efficiency shows the competition in local market and capability of regional business to meet the demands.
  3. Labour market efficiency assessment gives insight of the flexibility of labour market, availability of ready talent and gender equality in the work environment
  4. Financial market development explains the efficiency, stability, confidence & trustworthiness of the financial system and banking in the region.
  5. Technological readiness shows the utilisation and availability of technologies for efficient businesses for growth purpose
  6. Market size tells how big is the domestic and foreign market are available, useful for investors analysis.

Innovation and sophistication factors

  1. Business sophistication shows how sophisticated and efficient a region has for businesses, another area for attracting investors for future vision.
  2. Innovation assessment give insights about the capacity and commitment of a region in the field of innovation.

Although, world economic forum method of measuring competitiveness is widely accepted and recognised worldwide, it was criticised by many economists (Kordalska and Olczyk 2016). Lall (2001) argues that arbitrary weighting the variables and subject indicators are misleading.

India

On 15th February 2017, a world record of launching 104 satellites by a polar satellite launch vehicle was created by a space organisation where 101 satellites were from foreign countries. It was not from USA or Russia or countries from Europe, it was ISRO (Indian space research organisation) from India (Guinness World Record 2018; ISRO 2017). This achievement appears, regardless of multiple odds, maybe best features India’s potential and various ways that Indian economy offers.

India developed as a key player in worldwide economic affairs in the previous decade. It was among the couple of countries that figured out how to withstand the worldwide depression of 2008– 09 and kept on posting solid development in the following two years.

The decision of another and a steady government at the middle for the following five years has taken some vitality back to the economy. Guarantees of a progressively effective organization and arrangement accentuation on infrastructure, association with organizations, and better focus state coordination have restored excitement among speculators. What’s more, a current high measurement of remote arrangement blended with solid financial hints and the launch of the “Make in India” battle have returned the attention on India.

The present rapture is positively not lost. India’s medium-to long haul monetary essentials are strong. These incorporate a substantial market with 1.25 billion individuals, a significant number of whom are probably going to climb the salary stepping stool in the following 20– 25 years on the back of solid GDP development. India is additionally home to a youthful populace, a key mainstay of interest and the workforce. This market section will be progressively mindful of advancements in innovation, ways of life, and back, in this way compelling organizations to advance in the items and administrations they offer and their conveyance. Advancement will likewise be required to oblige provincial India, a market that is expansive and where middle salaries are rising quicker than in urban territories.

Lall, S. (2001). Competitiveness Indices and Developing Countries: An Economic Evaluation of the Global Competitiveness Report. World Development, 29(9). DOI: http://dx.doi.org/10.1016/S0305-750X(01)00051-1



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