Global Competitiveness Report 2016, Civil Services Notes, IAS, IFS, IPS

1. Global Competitiveness Report 2016
Amit Kumar Anand
www.amitkanand.com
September 28, 2016
1 Introduction
• The Global Competitiveness Report
20162017 comes out in the context of
persistent slow growth and a near- term
outlook that is fraught with renewed un-
certainty fueled by continued geopolitical
turmoil, financial market fragility, and
sustained high debt levels in emerging
markets.
• GDP growth has fallen from levels of 4.4
% in 2010 to 2.5 % in 2015.
• Many economies around the world strug-
gle with the double challenges of slowing
productivity growth and rising income in-
equality, often exacerbated by rapidly ag-
ing societies.
• Based on digital platforms, the Fourth
Industrial Revolution is characterized
by a convergence of technologies that is
blurring the lines between the physical,
digital, and biological spheres.
• Breakthroughs in technologies such as
artificial intelligence, biotechnology,
robotics, the Internet of Things, and 3D
printing, to name a few, will provide new
avenues for growth and development in
the future but could also give rise to
significant social challenges.
2 Fourth Industrial Revolu-
tion
• This transformationthe Fourth Industrial
Revolutionis not defined by any partic-
ular set of emerging technologies them-
selves, but rather by the transition to new
systems that are being built on the infras-
tructure of the digital revolution.
• As these individual technologies become
ubiquitous, they will fundamentally alter
the way we produce, consume, communi-
cate, move, generate energy, and interact
with one another.
• And given the new powers in genetic engi-
neering and neurotechnologies, they may
directly impact who we are and how we
think and behave.
3 Main Findings
• Many of the competitiveness challenges
we see today stem from the aftermath of
the financial crisis.
• The great recession led many advanced
economies to implement very loose mon-
etary policy, which in turn fueled a
global commodities boom that masked
many of the competitiveness challenges of
commodity-exporting emerging markets.
• Vulnerability to commodity price fluc-
tuations in emerging economies and the
promises of the Fourth Industrial Revo-
lution underscore the importance of in-
novation as a source of competitiveness
and economic diversification to reignite
growth.
• Against this background, it is clear that
1. monetary stimulus is not enough to
reignite growth if economies are not
competitive.
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2. 2. an increasingly important element
of competitiveness is creating an en-
abling environment for innovation.
3. innovation in turn goes hand in
hand with openness and economic
integration.
4 India’s Performance
1. India’s rank 39; highest jump of 16 places
from 55.
2. India’s GCI score stagnated between
2007-14. After the new government came
to power in 2014 GCI has improved year
on year.
3. Health and basic education improved
through out the decade.
4. Infrastructure improvement was small
until 2014 but picked up after improved
public investment and sped up approval
procedures to attract private resources.
5. Due to governance scandal and unman-
ageable inefficiencies India’s institutional
environment deteriorated until 2014 as
businesses lost trust in government and
public administration, but this trend re-
versed after 2014.
6. Financial market development also im-
proved after 2014 but not upto the pre
2008 levels.
7. Financial market development is the pil-
lar which is most dragging down India’s
competitiveness.RBI has increased trans-
parency in financial market and have
shed light on huge NPA, previously not
reported.
8. Technological readiness is also area of
concern where progress had stagnated.
Digital India could lead to significant im-
provements.
5 Reasons for India’s im-
proved Performance
1. Improved monetary and fiscal policies, as
well as lower oil prices, the Indian econ-
omy has stabilized and now boasts the
highest growth among G20 countries.
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3. 2. opening the economy to foreign investors
and international trade.
3. increasing transparency in the financial
system.
6 Areas for improvement
1. The labor market is segmented between
workers protected by rigid regulations
and centralized wage determination and
millions of unprotected and informal
workers.
2. The efficiency of the domestic market is
hindered by fiscal regulations that allow
federal states to levy different levels of
value-added taxes.
3. lack of infrastructure and ICT use remain
bottlenecks.
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