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World Economic Form ranks India 112th in labour market. Reason? "Failure" to deregulate protected workers
The World Economic Forum’s (WEF’s) latest report may have found that India has “climbed” its score to the 39th position in Global Competitiveness Index (GCI) among 138 countries, a whopping 16-place improvement in a year, thanks to what it calls “goods market efficiency, business sophistication, and innovation.”
The “Global Competitiveness Report 2016–2017” also talks of other factors which contributed to this “improvement”, including “lower oil prices” and “recent reform efforts”, which concentrated on “improving public institutions, opening the economy to foreign investors and international trade, and increasing transparency in the financial system.”
However, it admits, without mincing words, “Still, a lot needs to be done”. Especially wanting the Government of India to deregulate the labour market in the manufacturing sector, it says, in this segment, because workers are highly protected by “rigid regulations and centralized wage determination”, on this score India ranks one of the worst of 138 countries, 112th.
Pointing out that the high protection provided to industry workers continues at a time when there are “millions of unprotected and informal workers”, the report suggests, this is telling on “the efficiency of the domestic market”, in which India ranks 81st.
Another retrograde factor, WEF says, is the “large, publicly owned enterprises”, which “further reduce the overall efficiency of the economy, especially in the utilities sector and the financial market, where there is growing concern about the incidence of non-performing loans.”
Coming to other “bottlenecks”, the report says, thanks to lack of infrastructure, India ranks 68th, and, worse, in information and communication technology (ICT) use, it ranks 120th. In fact, it regrets “India’s stagnating performance on technological readiness, a pillar on which it scores one full point lower than any other.” It adds, “Higher education and training has also shown no improvement.”
Even as admitting that India’s GDP per capita “almost doubled” between 2007 and 2016, from US$3,587 to US$6,599, and the deterioration in 2012–13 “triggered India to rethink its policies and engage more firmly in the reforms necessary to improve its competitiveness”, the report suggests, much requires to be done in the social sector.
It adds, “Life expectancy increased to 68, up from 62 10 years ago, while primary education has become almost universal (up to 93.1 percent from 88.8 percent).”
However, the report underlines, there is nothing to cheer about this. “Although life expectancy has increased, for example, it is still low by global standards, with India ranking only 106th in the world; and while India almost halved infant mortality, other countries did even better, so it drops nine places this year to 115th.”
Based on data collected from International Monetary Fund (IMF), World Bank, and various United Nations’ specialized agencies, including the International Telecommunication Union, UNESCO, and the World Health Organization, the WEF’s GCI is based on 12 “pillars”.
These are: Institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.”
These pillars are in turn organized into three subindexes: basic requirements, efficiency enhancers, and innovation and sophistication factors. The three subindexes are given different weights in the calculation of the overall Index, depending on each economy’s stage of development, as proxied by its GDP per capita and the share of exports represented by raw materials.
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