The World Economic Forum, in its recently-released “The Inclusive Growth and Development Report 2017”, has ranked India No 60th in inclusive development index (IDI) out of 79 countries it has categorized as “developing economies”.
What should be worrisome for the policy-makers is, the WEF – which is a Switzerland-based international body known for engaging business, political, academic, and other leaders of society to “shape global, regional, and industry agendas" – ranks Pakistan 52nd, Sri Lanka 39th, Bangladesh 36th, Nepal 27th, and China 15th.
Saying that India is advancing slowly, the report notes, hte country’s poor IDI ranking has come about “despite the fact that its growth in GDP per capita is among the top 10”, its “labour productivity growth has been strong”, and “poverty has been falling, albeit from a high level.”
However, it comments, “On the other hand, its debt-to-GDP ratio is high, raising some questions about the sustainability of government spending.”
Providing reasons for poor IDI ranking, the report says, India’s “educational enrollment rates are relatively low across all levels, and quality varies greatly, leading to notable differences in performance among students from different socioeconomic backgrounds.”
It adds, “While unemployment is not as high as in some other countries, the labour force participation rate is low, the informal economy is large, and many workers are in vulnerable employment situations with little room for social mobility.”
WEF believes, “A more progressive tax system would help raise capital for expenditure on infrastructure, healthcare, basic services, and education.”
Even as saying that “India scores well in terms of access to finance for business development and real economy investment”, the report insists, “However, new business creation continues to be held back by corruption, underdeveloped infrastructure, and the large administrative burden involved in starting and running companies.”
Pointing to how poor, especially from the rural areas, have still not become part of free market, the report notes, “Recent research on poverty shows that tariffs and non-tariff barriers are higher for the poor, which limits their chance to access international markets.”
Giving the example of India, it says, the country’s tariffs “faced in destination markets are increasingly higher for goods produced by individuals in lower-income groups. Households in rural areas face an average tariff 10.9 percentage points higher than their urban counterparts.”
It adds, “This underlines that the poor are likely to pay the highest penalty if countries stall in their efforts to reduce barriers to trade, or worse, begin to roll back the reforms that have been achieved to date.”
Underlining that IDI “offers a more integrated and holistic picture of the state of economic development of countries than GDP per capita alone”, the report says, IDI is “useful for governments and stakeholders seeking to assess the effect of changes in policy and conditions within a typical political cycle.”
“Some countries score significantly better on the IDI than on the basis of GDP per capita, suggesting they have done a relatively good job of making their growth processes more inclusive”, such as Cambodia and Vietnam in the developing world. They rank 25th and 43rd respectively.
The report believes, “One drawback with GDP per capita is that it takes no account of distribution: it simply divides a nation’s income by the size of its population. If inequality in that country is very high, the resulting figure will provide a misleadingly optimistic suggestion of living standards for most individuals.”