It is common to find that economic variables and the yardsticks by which economic health is looked at often do not weave into one another. This occurs when the numbers and policy regulations do not have a two-way correspondence. And this is what is visible now. With economic indicators such as the index of industrial production not rising at the desired rate or sometimes even tailing off and the job situation showing signs of hobbling, India has risen 16 notches on the global competitiveness index of the World Economic Forum (WEF), from 55th in 2015-16 to 39th in 2016-17. This, when read with India going up 12 places on the World Bank’s Ease of Doing Business ranking, highlights at least on the policy plane the Indian economy is on track.
The question the WEF asks is: What is competitiveness? And the organisation defines it as “the set of institutions, policies and factors that determine the level of productivity of a country”. Growth and productivity are one aspect of the picture. Since policies and institutions are created to promote the welfare of people, another way to look at it is to judge it by the performance of human development indicators. But first the policies. The main thing that has aided India’s high rank is the goods and services tax and the way the political class has united to vote in its favour. Secondly, as India’s land market had all along been underdeveloped, the government has stepped in to ease the regulations that have been obstacles in the way of buying and selling land and the registration process. The creation of the Real Estate Regulation Act has been a facilitator in the process. Thirdly, though Indian banking is largely in the public sector, the granting of licences to set up private banks and payment banks will no doubt bring in competition and compel state-run banks to remain competitive. The merging of its associate banks with the State Bank of India is an instance of that. On the fiscal deficit front, though the combined deficit of the states and the Centre is still high, in the region of six per cent of GDP, the Centre has kept its own end up by keeping it in check.
This, however, is not the entire story. India still falls horribly short of targets on indicators such as public health, primary education and environment pollution. But it takes time for policy actions to materialise into social gains. To get a fuller picture of that we need to wait for the WEF’s next Human Capital Index.