India climbs, UK faces uncertain future in economic competitiveness
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India climbs, UK faces uncertain future in economic competitiveness 

By Ken Tysiac 
October 05 2016

Powered by improvements in life expectancy and youth education, India made the biggest climb in the World Economic Forum’s recently released Global Competitiveness Index for 2016–2017.

A year ago, India stood at 55th in the rankings, which measure a composite of the set of institutions, policies, and factors that determine the level of productivity of an economy and set the level of prosperity that a country is capable of achieving.

But India has benefited from infrastructure improvements, according to the report. Its infant mortality rate fell from 62 per 1,000, as reported in the 2007–2008 report, to 37.9 today. Life expectancy in India has risen from 62 to 68 over the past 10 years, and the rate of primary education is up to 93.1%.

The result was a jump to No. 39 in the rankings for 2016–17, which were released last week. Albania (from 93rd to 80th) was the only other country among the 138 in the rankings to move forward at least 10 spots.
 
A key to further progress for India lies in technological readiness.

“As the country closes the infrastructure gap, new priorities emerge,” the report said. “… Initiatives such as Digital India could lead to significant improvements in the next years.”

Another country that climbed in the rankings also received significant attention from the report’s authors – with less hopeful predictions. The UK rose three spots from 10th to 7th in the rankings, but the report data were measured before the nation’s vote to leave the EU in the “Brexit.”

The report predicted consequences for the UK as Brexit unfolds. In the short term, uncertainty over the unfolding legal changes will result in reduced investment, consumption, and foreign trade, the report says. In the long term, changes to the free movement of people, goods, services, and capital will be reflected in goods and labour market efficiency in the UK, according to the report.

Some regulatory changes made possible by Brexit may help the UK, the report says, but it predicts that those with middle incomes will mostly feel the long-term consequences of the withdrawal.

The entire top ten in the rankings were as follows (with the 2015–2016 rankings in parentheses):

  1. Switzerland (1)
  2. Singapore (2)
  3. US (3)
  4. Netherlands (5)
  5. Germany (4)
  6. Sweden (9)
  7. UK (10)
  8. Japan (6)
  9. Hong Kong SAR (7)
  10. Finland (8)

Switzerland maintained its No. 1 ranking for the eighth straight year and topped the rankings in the categories of labour market efficiency, business sophistication, innovation, and technological readiness. Other countries of note included:

  • US. Its high ranking is fuelled by innovation, business sophistication, market size, financial market development, labour market efficiency, and higher education and training. But stagnating productivity is a problem that the US will have to solve in the years ahead, according to the report.
  • Canada. Dropped from 13th to 15th, but has seen improvements in technological readiness, health and primary education, and labour market efficiency. Downward trends in innovation, business sophistication, financial market development, infrastructure, and goods market efficiency are some of Canada’s challenges.
  • China. Ranks 28th for the third year in a row. Its higher education ranking has especially improved, but its technological readiness remains a problem.

Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine editorial director.



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