Global Competitiveness Index 2015

The 2015 Global Competitiveness Index of the economic talk shop World Economic Forum has placed India on 55th place among 140 economies. This report defines competitiveness as ‘set of institutions, policies and factors’ that determine the level of productivity in an economy. WEF has been releasing such reports from 2006 onwards. Switzerland, Singapore, United States and Germany are top four economies in 2015-16 report.

What is composition of GCI?

GCI is made of 3 sub-indices viz. Basic Requirement, Efficiency Enhancers and Innovation and Sophistication factors. There are total 12 pillars in these three indices.

• Basic Requirement sub-index has 4 pillars viz. institutions, infrastructure, macroeconomic environment, health and primary education
• Efficiency Enhancers has 6 pillars viz. higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size
• Innovation & Sophistication Factors has 2 pillars viz. business sophistication and innovation.

The three sub-indices are given different weights in the calculation of the overall index, depending on each economy’s stage of development.

What are factor driven, efficiency driver and innovation driven economies?

According to the report, first four pillars viz. institutions, infrastructure, macroeconomic environment, health and primary education are the basic requirements for “factor driven” (underdeveloped) economies to allow them march towards development and competitiveness. Once these four pillars are strong enough, they need to another six pillars to become “efficiency driven” economies with even more competitiveness. These six pillars are higher education and training; efficient goods markets; efficient labour markets; developed financial markets; the ability to harness the benefits of existing technologies and its market size, both domestic and international. Once an economy is able to make significant progress on these 10 pillars, it would enter into the innovation-driven stage whereby it would be able to sustain higher wages and standard of living only if the businesses in that  are able to compete by providing new or unique products. Thus, such highly competitively economies need to innovate frequently to stay relevant. The two pillars of innovation-driven economies are Business sophistication and innovation.

In summary, if you want to be competitive, first provide basic facilities, then improve efficiency and finally innovate to stay relevant.

How has India fared in the Report?

India’s rank is 55th among 140 economies, showing a jump of 16 places from last year. The report cites key reforms by the NDA government as factors responsible for the 16 points strong jump in index. These include- removing infrastructural bottlenecks, improving public finances, efforts to improve growth and investment in farming and manufacturing etc.