Global competitveness

discusses about the 12 pillars on which the competitiveness of any nation is determined. the position of India among different nations on the basis of these parameters.

1. GLOBAL COMPETITIVENESS

2. COMPETITIVE INDEX: INTRODUCTION The Global Competitive Index integrates the microeconomic environment and micro/business aspects of competitiveness into a single index.

3. Who developed it? This mechanism of measuring competitiveness of nations was developed by Xavier Sala-I-Martin and Elsa.V.Artadi. This is widely used by World Economic Forum(WEF) in it’s Global Competitiveness Report(GCR). Before that, the macroeconomic ranks were based on Jeffery Sash's Growth Development Index and the microeconomics ranks were based on M ichael Porter’s Business Competitiveness Index.

4. What it does? It assesses the ability of countries to provide high levels of prosperity to their citizens by using available resources productivity. It measures the set of institutions, policies and factors that set the sustainable current and medium-term levels of economic prosperity. The index is calculated by aggregating indicators across 12 pillars in the report which covers both business and social indicators . These 12 pillars or indicators directly or indirectly impact the competitiveness of the country in the global arena. The GCI measures 12 pillars which include institutions, macro-economic environment, infrastructure, health and primary education, higher education and training, labor market efficiency, goods and market efficiency among others.  

5. PILLARS OF COMPETITIVENESS

6. INDIAN SCENERIO India is ranked 39 th among 138 countries in the 2016-2017 Global Competitiveness Index. The index was released as part of the World Economic Forum’s (WEF) Global Competitiveness Report for 2016-17 . India has emerged as the highest rising economy due to improvement in goods market efficiency, business sophistication and innovation . India’s overall competitiveness has increased due to improvements in institutions and infrastructure along with recent reforms such as opening the economy to foreign investors and increasing transparency in the financial system . Indian economy boasts the highest growth among G20 economies mainly due to improved monetary and fiscal policies, as well as lower oil prices which has stabilized economy .

7. India’s competitiveness has improved across the board, particularly in innovation (29), goods market efficiency (60) and business sophistication (35) indicators of GCI . India still needs remove labour market rigidities and the presence of large, public enterprises especially in the utilities and financial sector make the economy less efficiency.

8. 12 PILLARS OF GLOBAL COMPETITIVENESS

9. INSTITUTIONS It is determined by the legal and administrative framework within  which individuals , firms and governments interact to generate income and wealth in the economy . The importance of a solid institutional environment has become even more apparent during the current crisis, given the increasingly direct role played by the state in the economy of many countries . The quality of institutions has a strong bearing on competitiveness and growth . It influences investment decisions and the organization of production and plays a central role in the ways in which societies distribute the benefits and bear the costs of development strategies and policies .

10. Government attitudes toward markets and freedoms , and the efficiency of its operations, are also very  important :  overregulation, corruption, dishonesty in  public contracts , lack of transparency and trustworthiness. Proper management of the public  finances is also critical to ensuring trust in  the  national  business environment . An  economy is well served by businesses that are run honestly,  where managers have strong ethical practices in their dealings with the government .

11. INFRASTRUCTURE It determines the location of economic activity and the kinds of activities or sectors that can develop  in a particular economy.  Well-developed  infrastructure reduces  the effect of distance between regions, resulting on the integration of the national market and connecting it at low cost to markets in other countries and regions . The quality and extensiveness of infrastructure networks has an impact on economic growth and reduces income inequalities and poverty. In thisregard,awelldeveloped  transport and  communications infrastructure  network is  a prerequisite  for the connection of less-developed communities with  core economic activities and basic services . Effective modes of transport for goods, people, and services (such as qualityroads , railroads, ports, and air transport) enable entrepreneurs  to  get their goods and services to market in a secure and timely manner, and facilitate the movement of workers to the most suitable jobs .

12. Macroeconomic environment The stability of the macroeconomic environment is important for business and, therefore, is significant for the overall competitiveness of a country. Although it is certainly true that macroeconomic stability alone cannot increase the productivity of a nation, it is also recognized thatmacroeconomic disarray harms the economy, as we have seen in recent years.

13. The government cannot provide services efficiently if it has to make high-interest payments on its past debts. Running fiscal deficits limits the government’s future ability to react to business cycles. Firms cannot operate efficiently when inflation rates are out of hand. In sum, the economy cannot grow in a sustainable manner unless the macro environment is stable.

14. Health and Primary Education INDICATOR VALUE RANK/138 Malaria cases/100,000 pop 1312.4 41 Business impact of malaria 3.6 57 Tuberculosis cases/100,000 pop 167 111 Business impact of tuberculosis 3.7 129 HIV prevalence, % adult pop 0.3 60 Business impact of HIV/AIDS 3.7 127 Infant mortality, deaths/1,000 live births 37.9 115 Life expectancy, years 68 106 Quality of primary education 4.7 40 Primary education enrollment, net % 92.3 92 Rank(out of 140) Score(1–7) Health and primary education 85 5.5

15. Health and Primary Education A healthy workforce is vital to a country’s competitiveness and productivity. Workers who are ill cannot function to their potential and will be less productive. Poor health leads to significant costs to business, as sick workers are often absent or operate at lower levels of efficiency. Investment in the provision of health services is thus critical for clear economic, as well as moral, considerations Workers who have received little formal education can carry out only simple manual tasks and find it much more difficult to adapt to more advanced production processes and techniques, and therefore they contribute less to devising or executing innovations.

16. Higher education and training INDICATOR VALUE RANK/138 Secondary education enrollment, gross % 68.9 102 Tertiary education enrollment, gross % 23.9 93 Quality of the education system 4.5 29 Quality of math and science education 4.6 44 Quality of management schools 4.6 43 Internet access in schools 4.2 74 Availability of specialized training services 4.5 55 Extent of staff training 4.6 30 Rank(out of 140) Score(1–7) Higher education and training 81 4.1

17. Higher education and training In particular, today’s globalizing economy requires countries to nurture pools of well-educated workers who are able to perform complex tasks and adapt rapidly to their changing environment and the evolving needs of the production system. This pillar measures secondary and tertiary enrolment rates as well as the quality of education

18. Goods Market E fficiency INDICATOR VALUE RANK/140 Intensity of local competition 4.7 96 Extent of market dominance 4.2 31 Effectiveness of anti-monopoly policy 4.3 31 Effect of taxation on incentives to invest 4.5 25 Total tax rate, % profits 60.6 123 No. procedures to start a business 13 132 No. days to start a business 29 115 Agricultural policy costs 4.1 44 Prevalence of non-tariff barriers 4.6 47

19. Goods Market Efficiency INDICATOR VALUE RANK/138 Trade tariffs, % duty 13 123 Prevalence of foreign ownership 4.4 72 Business impact of rules on FDI 4.6 71 Burden of customs procedures 4.6 37 Imports as a percentage of GDP 24.6 121 Degree of customer orientation 4.6 71 Buyer sophistication 4.5 17 Rank(out of 140) Score(1–7) Goods market efficiency 60 4.4

20. Goods Market Efficiency Countries with efficient goods markets are well positioned to produce the right mix of products and services given their particular supply-and-demand conditions, as well as to ensure that these goods can be most effectively traded in the economy. Healthy market competition, both domestic and foreign, is important in driving market efficiency, and thus business productivity, by ensuring that the most efficient firms, producing goods demanded by the market, are those that thrive. Market efficiency also depends on demand conditions such as customer orientation and buyer sophistication. For cultural or historical reasons, customers may be more demanding in some countries than in others. This can create an important competitive advantage, as it forces companies to be more innovative and customer-oriented and thus imposes the discipline necessary for efficiency to be achieved in the market.

21. Labor market efficiency The efficiency and flexibility of the labor market are critical for ensuring that workers are allocated to their most effective use in the economy and provided with incentives to give their best effort in their jobs. Labor markets must therefore have the flexibility to shift workers from one economic activity to another rapidly and at low cost, and to allow for wage fluctuations without much social disruption.

22. Efficient labor markets must also ensure clear strong incentives for employees and promote meritocracy at the workplace, and they must provide equity in the business environment between women and men. Taken together these factors have a positive effect on worker performance and the attractiveness of the country for talent, two aspects of the labor market that are growing more important as talent shortages loom on the horizon.

23. Financial market development An efficient financial sector allocates the resources saved by a nation’s population, as well as those entering the economy from abroad, to the entrepreneurial or investment projects with the highest expected rates of return rather than to the politically connected. Business investment is critical to productivity

24. Therefore economies require sophisticated financial markets that can make capital available for private-sector investment from such sources as loans from a sound banking sector, well-regulated securities exchanges, venture capital, and other financial products. In order to fulfill all those functions, the banking sector needs to be trustworthy and transparent, and—as has been made so clear recently—financial markets need appropriate regulation to protect investors and other actors in the economy at large .

25. Technological readiness The technological readiness pillar measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries, with specific emphasis on its capacity to fully leverage information and communication technologies (ICTs) in daily activities and production processes for increased efficiency and enabling innovation for competitiveness.

26. The central point is that the firms operating in the country need to have access to advanced products and blueprints and the ability to absorb and use them. Among the main sources of foreign technology, FDI often plays a key role, especially for countries at a less advanced stage of technological development.

27. The market size is the tenth pillar of economy. The size of the market affects productivity as large markets allow firms to exploit economies of scale. In the era of globalization, international markets have become a substitute for domestic markets, especially for small countries . The exports can be thought of as a substitute for domestic demand. By including both domestic and foreign markets in measurement of market size, we give credit to export-driven economies and geographical areas that have single common market. Market Size

28. India is ranked 3 rd in the world in market size with the score of 6.4 . The parameters on which the countries are compared are : Domestic Market Size Foreign Market Size GDP Exports as a percentage of GDP

29. Business Sophistication concerns two elements that are intricately linked: the quality of a country’s overall business networks and quality of individual firms’ operations and strategies. The quality of a country’s business networks and supporting industries is measured by quantity and quality of local suppliers and extent of interaction. When companies and suppliers are interconnected , efficiency is heightened, greater opportunities for innovation are created and barriers to entry are reduced. Business Sophistication

30. India is ranked35 th in Business Sophistication with a score of4.4. The parameters on which the countries are compared are : Local Supplier quantity Local supplier quality State of cluster development Nature of competitive advantage Value chain breadth Product Process sophistication Extent of marketing

31. The final pillar of competitiveness focuses on technological innovation. It is important for economies as they approach frontiers of knowledge. Firms must design and develop cutting edge products and processes to maintain competitive edge and move toward even higher value added activities. Progression requires an environment that is conducive to innovative activity and supported by both public and private sector. Progress is achieved by investment in R&D and presence of high quality scientific research institutes. Innovation

32. India is ranked29 th in Innovation with a score of4.0. The parameters on which countries are compared are : Capacity for Innovation Company spending on R&D Quality of scientific research institutions Availability of Scientists and Engineers University-industry collaboration in R&D Government procurement of advanced tech products

33. THANK YOU !