Apart from the usual advertisements in the media, the fourth anniversary of India’s first-ever ‘branded’ government, Modi Sarkar, went by with very little of the kind of hard sell of the progress made over the year, which was what accompanied the first three years.
Perhaps it’s because the ruling party, coming off a victory which turned into defeat in Karnataka, and with worrying signs of some kind of Opposition consolidation, has other, more pressing matters on its mind as it approaches 2019. Perhaps it’s because the economy, having struggled through the shocks of earlier years — demonetisation and then the goods and services tax — and just about gathering steam, finds itself confronting new problems in the shape of rising energy prices, a falling rupee, and a seemingly endless crisis in the banking sector.
It really doesn’t matter what the reason is. What is important, however, is how far the needle has moved in real terms. What is also important is how far the rest of the world thinks India has moved. India is the fastest-growing economy in the world, it is the sixth largest country in terms of size of the economy in absolute GDP numbers, and the third biggest in purchasing parity terms. It may already have, or soon will, edge past China in population, have the youngest age profile, and so on and so forth.
Not an authoritative voice
But if we are such heavyweights, why does it feel as if we are consistently punching below our weight? Why is it that India, despite having clawed its way up to the top table of global economies, does not have the kind of authoritative voice which, for example, Britain and Japan wield?
Perhaps the hint of an answer lies in how India has fared in the latest ranking of major world economies by competitiveness. Professor Arturo Bris, Director of the IMD World Competitiveness Centre, which comes up with the annual IMD World Competitiveness Rankings, defines competitiveness thus: “There is no single nation in the world that has succeeded in a sustainable way without preserving the prosperity of its people. Competitiveness refers to such an objective: It determines how countries, regions and companies manage their competencies to achieve long-term growth, generate jobs and increase welfare.”
That’s a very good working definition for governance. This is why it is interesting to see how India has fared under the Modi government, since this administration, more than any other in the past, has placed a premium on efficiency of governance and made it a principal goal.
India’s report card
So, how did India fare? The IMD rankings, now in their 30th year, compare 63 of the world’s most important economies across 258 indicators. ‘Hard’ data such as national employment and trade statistics are weighted twice as much as ‘soft’ data from an Executive Opinion Survey that measures the business perception of issues such as corruption, environmental concerns and quality of life. As for India, we have moved up one place from 45 out of 63 countries in 2017 to 44 in 2018. We’re now in the same place as we were in 2014.
It is the detailed break-up, however, which suggests where the problem might lie. Across the competitiveness landscape, while we rank very high in economic size (third), we rank last in GDP per capita in purchasing power parity terms. That shows the twin challenges of population and inequality that we are struggling with — the benefits of growth are not trickling down fast enough.
It is in areas directly related to governance and governmental efficiency that India is ranked poorly. We rank in the bottom five in inflation, the bottom eight in public finance, a relatively high 24 in tax policy but a poor 42 in institutional framework, and a low 48 in business legislation.
India is ranked 54 out of 63 in basic infrastructure, an abysmal 61 in health and environment, and dead last in education. While ‘ease of doing business’ was one of the 15 factors to have seen the biggest improvement between 2017 and 2018, among the 15 biggest declines were indicators which hold the key to future growth: research and development expenditure, pupil-teacher ratios, total health expenditure, and so on.
The IMD rankings are not infallible and not everyone may share the perspective thrown up by a statistical exercise. After all, Walmart wouldn’t have paid $16 billion to acquire Flipkart, whose consolidated losses topped ₹8,770 crore in FY 2017-18, if it didn’t see the bigger potential in the India story.
But the fact that the real drags to India’s competitiveness lie in the areas which recent governments have tended to neglect tells us something. Right from the ‘India Shining’ National Democratic Alliance government to two United Progressive Alliance regimes to the current government, the focus has been on creating physical infrastructure like roads, airports and railway networks instead of ‘soft’ infrastructure like fixing our schools or repairing our degraded higher education system or making the population more healthy.
Time for a reset?
