Three reasons for India's jump in the Global Competitiveness Index

{mosimage}Has India's economic performance improved so much that the country's ranking in the Global Competitiveness Index of World Economic Forum (WEF) jumps 16 places to 55th position?

Well, if WEF's assessment is any indication, it has, as it says that it is India's recent economic recovery that has been underlined by the findings of its Global Competitiveness Index 2015-16.

Three parameters have underlined this change. The first was a revision in India's growth estimates by International Monetary Fund (IMF). Based on this revision, the IMF had forecasted in March that India's GDP growth will strengthen to 7.2 per cent in 2014/15 and rise to 7.5 per cent in 2015/16, driven by stronger investment following improvements to the business climate.

The second reason was the improvement in the macroeconomic situation; the key areas of improvement being lower inflation, decline in oil price-linked lowering of fiscal deficit etc.

The third reason why India's position rose in the Competitiveness Index ranking is the perception among the corporates who were surveyed by WEF. There is a general feeling that India is becoming a better place to do business.

More specifically, the visible change happened in terms of the quality of India's institutions (60th out of 140 countries; up 10 year-on-year). India's competitiveness has also been helped by a slight improvement in infrastructure (up six positions to 81 rank) and in its macroeconomic environment (91), which has been helped by a reduction in commodity prices and improvement in the government's budget deficit.

However, it is too early to rejoice. The business leaders who judged the quality of India's institutions more favourably still consider corruption to be the biggest obstacle to doing business in the country.

Hence, WEF suggests that to improve further, India must stay the course. "Its overall ranking is still hampered by one of the highest budget deficits in the world (131 out of 140), the quality of its electricity supply, which is still too low (91st) and, surprisingly for a country with so many IT champions, the overall technology readiness of its businesses, which comes in at a poor 120, up just one position on 2014", it notes.

The government would be riding high on the Digital India campaign, but WEF reminds us that the country remains one of the least digitally connected countries in the world, with fewer than one in five Indians accessing the Internet on a regular basis, and fewer than two in five estimated to own even a basic cell phone.

The 16-place jump is a positive signal, but the fine print the WEF report reveals, needs more serious attention.