Global Competitiveness and Indian position

The Global Competitiveness Reports released by the World Economic Forum (WEF) at regular intervals provide an objective assessment of the comparative business environments of the major nations. The study is undertaken in association with the Harvard Institute for International Development. The various economies are ranked on eight broad dimensions of the economic environment: openness to trade and investment, the role of the state, strength in finance, infrastructure, technology, management, labor, and civil institutions.

In recent Global Competitiveness Report, India is ranked 50 relative to 53 countries of the world. Singapore heads the list as the world’s most competitive economy. The USA ranks a close second.

Obviously, there are more weaknesses than strengths. First, despite the importance of the stock exchange, India’s financial markets are generally viewed as deficient. Second, administrative regulations are viewed as strongly constraining business activities. Third, the quality of infrastructure is judged to be abysmal. This is true in all areas; roads, ports, power, and telecom. India was ranked last in overall infrastructure. Fourth, the research and development nexus is judged to be very weak, with little collaboration between business and academics, and little success in commercializing or adopting new technologies. Fifth, labor markets are judged to be ineffective, perhaps the most ineffective in the world. Finally, the high prevalence of irregular payments, i.e. bribes, connected with permits and licenses adds to the inefficiencies.

A few favorable Aspects:

There are some reasonably strong advantages to which, if exploited well, can make India a global production center in, at least, a few selected products/ services. In the matter of human resources, in particular, India’s position is quite attractive. For several years now, the country has been a supplier of doctors, engineers and technicians not only to the expertise-scarce countries of the Middle-East and Africa, but even to the most demanding countries like the US. Even in the modern business of IT, India has developed great clout. In other words, in practically all modern branches of learning, an abundance of high caliber people are available. India possesses the third largest pool of skilled workforce in the world. And, this human resource is available at a relatively low price. For example, according to World Bank estimates, average monthly wages for a computer programmer in India are just $225. In Philippines, it is $450, in Singapore $600, Malaysia, $800, UK, $2000 ad the USA, $2,500. Considering specific industries/product categories, India has strong competitive advantage in agro-products, leather, textiles, gems and jewelry, fine chemicals, auto parts, machine tools, light engineering products, two wheelers, engineering services, IT/ computer software and tourism.

Competitive Advantage of the individual Firm:

Competitive advantage of the individual firm is another factor to be reckoned on formulating global strategies. In fact, it is the competitive advantage of the individual firms concerned that will finally decide the choice of strategies for global markets. The competitive advantage of the firm has to serve as the back up for its strategy formulation and execution. In fact, competitive advantage of the individual firms is as significant in global business as it is in domestic business. It is suffice to state here that in global business, competitive advantage of the individual firm and of the nation must go as a package.

We discussed the topic of competitive advantage at length to highlight one point. When there are significant competitive advantages at the nation-level and at the business unit level, one can play the global game with confidence. When these two entities converge global competitiveness is the result.

And this is main issue facing India today. India as a nation and Indian firms as business entities have to make their products internationally competitive in quality, price and other parameters, if they have to achieve any worthwhile position in the global markets. The poor competitiveness of India is the cumulative effect of gaps in a variety of vital areas technology, productivity, quality, delivery standard, marketing savvy and infrastructure. Most of these deficiencies are tackled and India’s position on the global competitive scale of late has shown much improvement.

  • Anindya chatterjee

    I’m not sure of the year of the report from which you have quoted your stats. In the recent report 2007-08, the U.S is ranked 1 followed by Switzerland. Can you please clarify this for me?