Friday, October 1, 2010

Indians should vote competitiveness in and party manifestos out

Studies on competitiveness of nations are rare but they are invaluable. Of course there may be differences of opinion between academic economists and business economists as to how competitiveness is defined and measured.
If we leave these differences out, what we get is a consistent view (or a view as accurate as the data collated gets) from one agency looking at same set of countries from the same lenses over a period of time.  As a voluntary researcher, this to me is invaluable.

The World Economic Forum (WEF) puts out an annual study on competitiveness called the global competitiveness report (GCR). WEF studies some 114 countries every year and have been doing so since 1979. The WEF model for calculating the competitiveness indices takes into account what it calls the 12 pillars of competitiveness under three categories based on the stages of economic development of any country.

The WEF's GCR team has a way of capturing data points for each of the 12 pillars as consistently as possible, assign weights to balance anomalies and analyse the data to arrive at the rankings each year. Since 1979, these reports have examined the many factors enabling national economies to achieve sustained economic growth and long-term prosperity. The goal over the years has been to provide benchmarking tools for business leaders and policymakers to identify obstacles to improved competitiveness, stimulating discussion on strategies to overcome them.

For the past several years, the World Economic Forum has based its competitiveness analysis on the Global Competitiveness Index (GCI), a highly comprehensive index for measuring national competitiveness, which captures the microeconomic and macroeconomic foundations of national competitiveness. And the GCI framework is supported by the Institute of Strategy and Competitiveness with active participation of  luminaries like Harvard's Michael Porter.

From my point of view, assuming that WEF data is accurate and the framework is reasonable within verifiable assumptions, the GCR rankings are as close as I can get to evaluating national competitiveness on a regular basis. I have been studying GCR reports for the last 6 years and have found some very interesting trends. It was very interesting to compare how the 4 largest economies have fared on the 12 parameters and how that has contributed  to their competitiveness.  Many of the observations I make here may already be known. But to have it compared is not only educational but just simply exhilirating.  Take a basic snapshot of how India's has fared over the last 6 years.

So despite the GFC, the US is still the fourth most competitive nation in the world after Switzerland, Sweden, and Singapore. What it also tells me is that these countries may not have the scale (which is a measure of complexity and opportunity) but are tight ecosystems that have well oiled growth engines that are built on competitiveness. China has consistently climbed every year for the last 6 years very impressively. What worries me is that India has been slipping since 2006 and we will see why in subsequent posts.

Why am I doing this? 
First of all, in an earlier post, I did say that India should have a performance score card. I also said internal benchmarks are not sufficient.  Benchmarks should be against worthy competitors  There are several potential uses for such progress reports.  Firstly all things being equal, it gives us the gaps between the leading and trailing economies. Further think of the possibility of linking the performance of individuals, institutions and establishments accountable for each of the 12 pillars to a competitiveness index. Perhaps Indians should vote based on these metrics rather than party manifestos. What do you say?
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1 comment:

  1. Communcating the value of the pillars to the voting populace would be your first hurdle.