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Global Competitiveness:INDIA DROPS TO 51st POSITION, by Dr. P. K. Vasudeva (Retd), 1 October 2010 Print E-mail

Open Forum

New Delhi, 1 October 2010

Global Competitiveness


By Dr. P. K. Vasudeva (Retd)


It is a matter of grave concern that India has slipped by two places to 51st in the World Economic Forum's (WEF) global competitiveness rankings, while rival China has managed to improve its standing to 29th position. The global competitiveness rankings are viewed as a barometer of the business climate in 139 countries and mirrors the assessments of leading businessmen on a range of political, social, and economic parameters

As per the WEF's Global Competitiveness Report 2010-11, released recently, Switzerland is number one in the world in terms of its ability to provide the most competitive environment on several fronts.

Sweden, another technology powerhouse in Europe, ranks second, followed by Singapore and the United States, which both fell by two positions from their ranking last year. The African nation of Chad figures at the bottom of the list.

Though Switzerland has "state-supported monopolies in key sectors, it maintains overall economic stability and largely open trade and investment policies," explains Margareta Dryeniek Hanouz, senior economist and director of the WEF, who is also the co-author of the report.

India has been pushed down from 51st position to 49th due to its poor performance in a range of social sector areas such as education, health and infrastructure. Though India has performed well in complex financial sector areas, attaining the 17th rank globally in terms of its financial markets, 44th in business sophistication and 39th in innovation, it has failed to improve the basic drivers of competitiveness, the report said. "There are two India’s," said Thierry Geiger, an associate director at WEF, who also authored the report. "While there is widespread poverty, poor health and education facilities and poor infrastructure in rural India, the other India is experiencing rapid growth," he added.

China, which climbed up to 27th position from 29th last year, came in for praise for making a dent in poverty and for improving overall access to education and health, suggesting that India is far from making a noticeable impact in these two areas.

Consequently, life expectancy is 10 years shorter in India as compared to China and Brazil. Despite high economic growth, India continues to be plagued by budget deficits, high public debt and high inflation. In contrast, China has over $2 trillion in foreign exchange reserves and a sound macro-economic environment and India has $293 billion as the balance of payment and poor macroeconomic environment.


The reasons for India sliding down in the global competitiveness ranking are:    Least care for people below poverty line; rising inflation and increasing fiscal deficit.

Insofar as people being below poverty line are concerned, the present Government appears to be working on sheer vote bank politics. It is least bothered to take care of the population below poverty lines and is sticking to reservations based on castes, which needs to be completely abolished.

According to a recent committee, constituted by the Government to estimate poverty, nearly 38 per cent of India’s population (380 million) is poor. This report is based on new methodology and the figure is 10 per cent higher than the present poverty estimate of 28.5 per cent.  


The committee, headed by SD Tendulkar, used a different methodology to reach at the current figure. It has taken into consideration indicators for health, education, sanitation, nutrition and income as per National Sample Survey Organization survey of 2004-05. This new methodology is a complex scientific basis aimed at addressing the concern raised over the current poverty estimation.


Since 1972 poverty has been defined on basis of the money required to buy food worth 2100 calories in urban areas and 2400 calories in rural areas. In June this year, a government committee headed by NC Saxena estimated that 50 per cent  Indians were poor as against Planning Commission’s 2006 figure of 28.5 per cent.  


Even after more than 63 years of Independence, India still has the world's largest number of poor people in a single country. Of its nearly one billion inhabitants, an estimated 260.3 million are below the poverty line, of which 193.2 million are in the rural areas and 67.1 million are in urban areas. More than 75 per cent of poor people reside in villages. Poverty level is not uniform across India. The poverty level is below 10 per cent in States such as Delhi, Goa, and Punjab etc whereas it is below 50 per cent in Bihar (43 per cent) and Orissa (47 per cent). It is between 30-40 per cent in Northeastern states of Assam, Tripura, and Mehgalaya and in Southern states of Tamil Nadu and Uttar Pradesh.


In regard to rising inflation, the Government has to make serious efforts to control its inflation, hunger and malnutrition. This is one of the reason that life span of its citizens instead of improving is slipping down. India's food inflation in September 2010 rate rose further to 11.47 per cent in the week ended August 28 from 10.86 per cent in the previous week, staying in double-digit territory for the fifth straight week.

The return of the food inflation rate to double digit levels last week after two weeks in single digit territory came at a time when the Government was facing a steady attack from the Opposition on the issue of rising food and fuel prices. High prices of food items have been a cause of worry for the Government since the worst monsoon in more than three decades last year and floods in some States adversely affected the Kharif crop. The Government must take action on hoarders and smugglers to control inflation.


India’s fiscal deficit soared by 34 per cent to Rs 3.5 lakh crore in the first ten months of the financial year against Rs 2.62 lakh crore a year ago, mainly on account of the stimulus measures taken by the Government to prop up the economy hit by the global financial crisis.

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emptyThis makes the April-January fiscal deficit at 87.2 per cent of the budgeted estimate of 4.01 lakh crore for the current fiscal. To spur economic activities, the Government had initiated massive spending programmes and slashed duties from December 2008 in three stage following the global financial crisis that began in September 2008.


India's fiscal deficit, including the Centre and States, would be among the highest in the world and is likely to be 10.3 per cent of GDP in the current fiscal and 10 per cent in the next fiscal. The deficit would not come down substantially over the next few years due to increase in spending, especially on higher wages and unemployment benefits as well as a large increase in the Government's interest burden. The Government expenditure has to be curtailed to keep the fiscal deficit under check.



If India has to retain its lost sheen, it has to do well in social fields such as education and health. It needs to emulate Kerala and Gujarat for their performance in these two sectors, but the Government ignores the claim of Kerala for more incentives for its high contribution to health and education sectors. Indeed, these micro socio-economic parameters need to be given weightage when doling out Plan funds.--INFA


(Copyright, India News and Feature Alliance)

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