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The blood suckers of Kangress have weakend India, but Modi-ji will rectified the situation.
http://blogs.ft.com/beyond-brics/2014/09/04/why-is-indias-relative-competitiveness-waning/
Why is India losing the competitiveness race?
India emerges from the latest World Economic Forum Global Competitiveness Report as the sickest member of the BRICs. It is ranked a lackluster 71st among 144 countries surveyed, down 11 places from last year and 22 places from five years ago. Moreover, it is ranked the lowest among its peers for the first time in years (China comes in 28th, Russia 53th, Brazil 57th).
The consequences of India’s lower GDP growth are also increasingly obvious: whereas India’s GDP per capita was higher than China’s only 15 years ago, it now stands at only a quarter of that of its Eastern neighbor.
So how come this all happened, and what can be done about it?
According to Thierry Geiger, an economist at the Forum and co-author of the report, India’s lack of strategic investments is to blame, especially compared to China.
“We’ve seen very little progress [in India] when it comes to the basic drivers of competitiveness, such as infrastructure, health, education and the institutional framework,” he told beyondbrics. “China on the other hand, massively invested in infrastructure.”
The result, says Geiger, is that while China has consolidated its position, India has remained a largely informal and agricultural economy. Indeed, 90 per cent of its workers operate in the shadow economy; 47 per cent are active in agricultural activities.
Soruce: World Economic Forum
So shouldn’t India try to leapfrog the manufacturing phase all together? Couldn’t it join China, ASEAN, and other countries in pursuit of high value added jobs and innovations in IT, R&D and outsourcing? No, argues Geiger, because “the successes India has had in IT and business process outsourcing (BPO) are encouraging, but not to the extent they can create tens of millions of jobs.”
India couldn’t leapfrog development if it wanted to: its workforce is poorly educated at best, and its physical and digital infrastructure is inadequate. Or as the report notes: “despite mobile telephony being almost ubiquitous, India is one of the world’s least digitally connected countries. Only 15 per cent of Indians access the Internet on a regular basis.”
As such, India’s population is better suited for manufacturing than service industry jobs. And instead of targeting cutting edge technological innovations, the country might be better to find low tech solutions for the majority of people who limit their mobile phone use to SMS messages, missed calls and brief conversations.
Indeed, India should take “one step at a time”, and become an effective manufacturing hub first.
But how can it achieve this?
The government first needs to create a basic infrastructure. The financing for it could come from public private partnerships or foreign investments, as public funds are insufficient. In that regard, India’s recent rapprochement to Japan is a step in the right direction.
Once the infrastructure is set up, manufacturing could thrive. That could open the door to a second crucial step in India’s development: a higher proportion of the population and businesses contributing to the country’s tax base. Indeed, it is easier and more constructive to attract manufacturers and make them pay taxes, than it is to go after poor and rural farmers.
More tax income in turn would increase chances for the government to enter a positive cycle of reduced red tape, less corruption and bribes, and again higher tax incomes. In that sense, focusing on manufacturing could kill two birds with one stone: better incomes for workers, and stronger foundations for the government.
Finally, with better infrastructure, a more solid tax base, and a more efficient government, India could start thinking of the next development phase.
Further reading:
Seize the moment for India’s revival, FT
Hope grows that Modi will cut bureaucracy to foster business, FT
Has India missed the manufacturing boat, FT video
http://blogs.ft.com/beyond-brics/2014/09/04/why-is-indias-relative-competitiveness-waning/
Why is India losing the competitiveness race?
India emerges from the latest World Economic Forum Global Competitiveness Report as the sickest member of the BRICs. It is ranked a lackluster 71st among 144 countries surveyed, down 11 places from last year and 22 places from five years ago. Moreover, it is ranked the lowest among its peers for the first time in years (China comes in 28th, Russia 53th, Brazil 57th).
The consequences of India’s lower GDP growth are also increasingly obvious: whereas India’s GDP per capita was higher than China’s only 15 years ago, it now stands at only a quarter of that of its Eastern neighbor.
So how come this all happened, and what can be done about it?
According to Thierry Geiger, an economist at the Forum and co-author of the report, India’s lack of strategic investments is to blame, especially compared to China.
“We’ve seen very little progress [in India] when it comes to the basic drivers of competitiveness, such as infrastructure, health, education and the institutional framework,” he told beyondbrics. “China on the other hand, massively invested in infrastructure.”
The result, says Geiger, is that while China has consolidated its position, India has remained a largely informal and agricultural economy. Indeed, 90 per cent of its workers operate in the shadow economy; 47 per cent are active in agricultural activities.
Soruce: World Economic Forum
So shouldn’t India try to leapfrog the manufacturing phase all together? Couldn’t it join China, ASEAN, and other countries in pursuit of high value added jobs and innovations in IT, R&D and outsourcing? No, argues Geiger, because “the successes India has had in IT and business process outsourcing (BPO) are encouraging, but not to the extent they can create tens of millions of jobs.”
India couldn’t leapfrog development if it wanted to: its workforce is poorly educated at best, and its physical and digital infrastructure is inadequate. Or as the report notes: “despite mobile telephony being almost ubiquitous, India is one of the world’s least digitally connected countries. Only 15 per cent of Indians access the Internet on a regular basis.”
As such, India’s population is better suited for manufacturing than service industry jobs. And instead of targeting cutting edge technological innovations, the country might be better to find low tech solutions for the majority of people who limit their mobile phone use to SMS messages, missed calls and brief conversations.
Indeed, India should take “one step at a time”, and become an effective manufacturing hub first.
But how can it achieve this?
The government first needs to create a basic infrastructure. The financing for it could come from public private partnerships or foreign investments, as public funds are insufficient. In that regard, India’s recent rapprochement to Japan is a step in the right direction.
Once the infrastructure is set up, manufacturing could thrive. That could open the door to a second crucial step in India’s development: a higher proportion of the population and businesses contributing to the country’s tax base. Indeed, it is easier and more constructive to attract manufacturers and make them pay taxes, than it is to go after poor and rural farmers.
More tax income in turn would increase chances for the government to enter a positive cycle of reduced red tape, less corruption and bribes, and again higher tax incomes. In that sense, focusing on manufacturing could kill two birds with one stone: better incomes for workers, and stronger foundations for the government.
Finally, with better infrastructure, a more solid tax base, and a more efficient government, India could start thinking of the next development phase.
Further reading:
Seize the moment for India’s revival, FT
Hope grows that Modi will cut bureaucracy to foster business, FT
Has India missed the manufacturing boat, FT video
