MUMBAI: India is surely snapping at the dragon’s heels. The latest Global Competitiveness Index (GCI) put out by the Geneva-based World Economic Forum (WEF) shows that the India-China gap is narrowing, with China just one step ahead at Rank 49 against India’s 50.
The forum’s Global Competitiveness Report 2005-06, released on Wednesday, says the gap was closed because China slid three places from last year while India gained five. According to the report, "India’s improved rank mirrors the country’s somewhat higher position in the technology index."
The main pillars of the GCI ranking methodology are three - the quality of a country’s macroeconomic environment, the state of its public institutions, and the level of its technological readiness.
Barring macroeconomic environment, India scores higher than China in the other two parameters.
Rajeev Karwal, former managing director of Swedish white goods major Electrolux in India and chairperson of Confederation of Indian Industry’s consumer durables division, says that while China scores in terms of less corruption at the highest political decision-making level and in providing good quality infrastructure for companies wanting to do business there, many Chinese firms lack adequate marketing skills.
Besides, India is far ahead of China in terms of its ability to speak the English language.
Haier India’s managing director T K Banerjee says that India lags behind China in terms of the ability to achieve economies of scale.
"This is where Chinese companies score heavily, since large economies of scale provide them with a cost advantage over Indian counterparts". India, however, fares much higher in the Business Competitiveness India (BCI), which focuses on microeconomic factors that are critical to national competitiveness, including the sophistication of a company’s operations and strategy, and the quality of the national business environment in which it operates. India is way ahead at No 31 against China’s 57.
Economist Jagdish Bhagwati of Columbia University commends the performance of both India and China in the competitiveness game, saying that the two countries had moved from insular policies to 'outward-oriented trade regimes, and dramatically reduced poverty.'
He strongly warns well-meaning economists about the dangers of"advising poor countries to seek protectionism for themselves while demanding that rich countries lower their trade barriers".
Talking about the positive effects of globalisation, Bhagwati said that "by increasing prosperity, as measured by the gross domestic product (GDP), there is more wealth to spend on the education of children, especially girls, and increasing competition among firms lessens rather than increases gender inequities."
The top 10 in the global GCI league are Finland - which has repeated its performance from 2004 - followed by the US, Sweden, Denmark, Taiwan, Singapore, Iceland, Switzerland, Norway and Australia.
"In many ways, the Nordics have entered virtuous circles where various factors reinforce each other to make them among the most competitive economies in the world," says Augusto Lopez-Claros, chief economist and director of the WEF’s global competitiveness programme.
Commenting on the performances of India and China, Lopez-Claros said, "In both cases, it has reflected efficiency gains stemming from the elimination of gross distortions in resource allocation; the move to more open and better policies has contributed to major improvements in productivity."
"The warning signals, though, are clear for India: Notwithstanding its excellent growth performance over the past decade, the country continues to suffer from institutional weaknesses, which, unless addressed, are likely to slow down its ascension to the top tier of the most competitive economies in the world," Lopez-Claros said.
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