India ranked 29th in World Yearbook

India has gained 10 spots to bag the 29th place in the latest World Competitiveness Yearbook released by the International Institute of Management Development (IMD).

The 2006 yearbook, which ranks 61 economies on the basis of economic performance, government and business efficiency and infrastructure, ranked the US as the world's leading economy followed by Hong Kong and Singapore.

Apart from India, China also moved up the rankings jumping 12 spots to finish at the 19th spot.

"The proliferation of powerful new local enterprises and brands in China and India illustrates how quickly the world is producing new actors and competitors," the study said.

The report noted that the US and France are still the second and fifth largest exporters in the world thanks to very dynamic enterprises. In both nations, business outperforms government.

"India and China face similar gaps between government and economic performance, but for different reasons. With growth rates of 8.1% and 9.9% respectively, both governments face the challenge of keeping pace with rapid economic expansion," said the report, recently released in Lausanne (Switzerland).

Their task now is to meet the standards and expectations of a buoyant economy, it said.

"Failure to do so may create economic and social imbalances that could jeopardise what has been achieved so far," the report warned.

The report also pointed out that success had a price.

"To support and stimulate the competitiveness of their country, governments need to remain on top of economic imperatives. Hong Kong and Singapore are catching up with the US because their governments are more in synchronisation with economic performance," it said.

Companies that move manufacturing abroad to lower production costs stand to benefit from comparative advantages, but also run a risk of creating new competitors, it said.

"An extended, global value chain based on the networking of partners implies more corporate proprietary information is freely shared inside the system and thus can be copied or stolen," the 2006 World Competitiveness Yearbook said.

"In such an open environment, friends can quickly turn into enemies," it said.

The report forecast that a key dynamic in the global economy will be the "creation of a middle class in previously ... Underdeveloped markets, mainly in Asia, where 600 million people already reached this status in the past five years and thereby generated an explosion in consumer goods sales."

Advances in communication, transportation and logistics have enabled firms to "manage the value chain globally" and develop multi-country sourcing strategies, it said.

For 2006, the report also calculated the biggest negative differences between the government's contribution and the economy's contribution to the overall competitiveness of a country. In these calculations, the governments of Venezuela, Argentina, Brazil, Mexico and Italy fared the worst and significantly lag behind their economic performance.

The lowering of trade barriers and the explosion of Internet are accelerating the pace of change, the report said.