JOIN USIndia’s economic competitiveness is on the wane. For the third year in a row, India has fared poorly in the global competitiveness index, slipping 10 notches in the past year, putting paid to the Narendra Modi government’s full-throated campaign on restructuring the economy to make it competitive and kicking. The World Economic Forum’s competitiveness index report ranks India at a low 68 among 141 economies surveyed in 2019. In the last three years, India has slipped 29 places, sending ominous signals to both domestic and foreign investors. In the first three years of the Modi government, India had risen 32 places on the index. Given that the WEF ranking on competitiveness is regarded as one of the most comprehensive exercises, with 103 parameters gauged across 12 verticals, there’s every reason for the government to sit up and take note.
Though India has done well on innovation and expansion in market size, the weakest links may be the financial sector, which is characterised by a high level of non-performing assets, delinquencies and lack of confidence amongst all stakeholders, including those holding deposits with banks and financial institutions. Though the government has initiated measures to restructure the banking and financial sector to make the institutions viable, it has yet to evolve lasting and sustainable solutions. For instance, the exit route for a failed business is still very messy. Similarly, non-repayment of loans in the event of even genuine business failures is regarded as a crime, but wilful defaulters continue to play foul with banks at will.
Prime Minister Modi’s government has never lost an opportunity to trumpet its purported success in facilitating ‘ease of doing business’. But then, the Modi regime’s ineptness in handling the economy has been on distinct display with the markets and the economy tumbling over the last few months. The WEF report also pointed to increasing insecurity among workers as a key parameter that pulled India down in the competitiveness index. In effect, the report vetoes the proposed labour market reforms that seek to make ‘hire and fire’ easy. Expanding the social security net, an assured minimum wage, healthcare facilities for both daily wagers and workers in permanent establishments are welcome. Providing workers secure opportunities, skilling and retraining are the key issues in labour reforms. Hence, working on both banking and labour issues to perk up the economy’s competitiveness should be priorities for the government. And, helping the industry make quality products and services at competitive prices for both the domestic and global markets should be the agenda.