INDIA’S COMPETITIVENESS

Rank of India is 49 out of the 133 nations in the Global Competitiveness Index. At
present
factor driven competitiveness drives India.

India performs abysmally poor in Health and Primary Education with a rank of 101.
Alarming sanitary situation, insufficient quality and quantity of education drags
India down in competitiveness. Energy and transport infrastructure ranked at 76th
needs improvement. Corruption and Securities issues remain to be addressed.

India has better position when it comes to efficiency indicators. India’s financial
system ranks 16th indicating development in this system. India has a strong
banking system ranked at 25th. Due to huge population and growing purchasing
power of consumers, India ranks 4th in market size. Presence of a number of
competitors makes India’s market efficiency reasonably good (rank: 48th). India still
needs to work on lowering the entry barriers in certain markets. Rigid hiring and
firing policy earns a low rank in labour market efficiency (rank: 83). Low penetration
rate of internet and communication technology has resulted in poor rank (83) in
technological readiness. Despite a strong and reliable higher education system, the
rank of India in Higher education is 66 due to the lack of sufficient accessibility to
all.

It is remarkable to notice India’s rank in innovation drivers. India ranks 27th in

business
sophistication and 30th in innovation. When compared to other nations India lacks
behind in several parameters. China is ahead of India in 10 out of the 12 pillars of
competitiveness. India enjoys competitive advantage in financial market
sophistication, market size, business sophistication and innovation. India’s
performance could be analyzed on the basis of each of the 12 pillars of
competitiveness.

Institutions
India stands out much ahead of the countries of same income group and region
when it comes to institutions. Business communities perceive India positively when
it comes to institutions.
Government: Government efficiency and ability to nurture a business-conducive
environment is evaluated encouraging by entrepreneurs.

Judiciary System: The independent and well functioning judiciary system provides
India
a sound scope to implement rule of the law.

EMP APRIL 09 – Micro Economics of Competitiveness

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Intellectual Property Rights: India is also ranked low in Intellectual Property Rights
(IPR) related issues. Considering the importance role played by IT and
communication
technology it is imperative to strengthen the IPR related laws in India.

Corruption: Business communities rank India poor on trust on politicians and

administrative/bureaucratic corruption. Transparency International has ranked India
85 out of 180 nations in Corruption Perception Index. India is still considered as a
nation where business is affected by bureaucratic red tape. May be a second round
of reforms to eliminate the red tape is demand of the time now.

Terrorism: Threat of terrorism has been always associated with India. The serial
bomb
blasts in various cities of the nation followed by the Mumbai terrorist attack stains
negative colours on the business environment of India.

Crimes: On a positive note India ranks much better when it comes to other forms of
crimes scoring well above its comparative nations of same income group and region

Private Institution: India’s rank in private institutions is at a reasonable number of

51.
Unfortunately the rank has shown a negative movement which might be assigned to
Satyam episode. India needs to improve its accounting and corporate governance
practices in order to unmask such scams.

Infrastructure
Indian competitiveness is adversely affected by the poor state of infrastructure and
lack of it. Shortage of power, water and transportation facility etc. hold back India.
The country ranks 76 in infrastructure. Some economists opine that lack of
infrastructure prevents India’s transition from an agrarian economy to a
manufacturing economy.

Electricity: Electrification is the biggest infrastructural challenge faced by India.

Electricity production per unit of GDP has started falling after 2000. The electricity
loss during distribution and transportation remain s a major problem to be tackled.
High government regulation and dominance of public players have added to the
wounds of power sector

Road Transport: India ranks below Pakistan and China when it comes to road
communication. 65% of freight and 85% of passenger traffic are carried by the road.
Hence, Improvement of road connectivity is imperative. Road accidents are also
high in India. This underscores the need of road safety.

EMP APRIL 09 – Micro Economics of Competitiveness

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Port Infrastructure: India’s port infrastructure suffers from low turnaround time,
insufficient handling capacity, and frequent human intervention. Low productivity
and bottlenecks make the situation worse. It is reported that India’s ports operate at
more than 90% of their capacity. This emphasizes the need of upgrading the
existing ports and building new ports to meet the business and trade requirements.
Indian government’s attempt to encourage public-private partnership (PPP) is
expected to bring reforms in port functioning. Government is also planning to
provide more autonomy to major ports to increase their performance.

Air transport: India is out-forming many of its comparative countries in terms of air
transportation. Government’s decision to end state monopoly in aviation sector has
paid up. Competition among private and public players, emergence of low cost
airlines has demonstrated the dynamism of India’s aviation sector. Governments
initiative to modernize 35 airports are and privatization of Mumbai, Delhi,
Hyderabad, Cochin and Bangalore airports are expected to increase the efficiency
and performance of aviation sector.

Railroad: With 14 million passengers daily, India’s rail is the largest rail of the world.
Indian ranks an impressive 20th position in rail infrastructure. However, the high
density
road corridors face capacity constraints.

It is widely accepted that India’s infrastructure development would be possible

through investment. Lack of sufficient public funds emphasized public private
partnership (PPP) in this sector. Allocation of more than 40% of budgetary outlay to
infrastructure development in the 2010-2011 budgets is positive signal at long-term
orientation for competitiveness building.

EMP APRIL 09 – Micro Economics of Competitiveness

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