India Ranks 96th In Growth Indicators; The Netherlands Takes The Top Spot
Global consultancy KPMG’s Growth Promise Indicators (GPI) report showcases that low-income countries are now prioritising infrastructure and related developments over technological developments. How does India fare in this list of 181 countries?
The best and the rest
A single unique GPI has been created for each country based on the country’s strengths in terms of macroeconomic stability, openness to catch up, infrastructure, human capital and institutional strength. Data over the last 20 years has been churned and weighed to create these GPIs. The Netherlands, Switzerland and Luxembourg are among the top three while India is at the 96th position. Central African Republic, Eritrea and South Sudan are the last three in the list.
Macroeconomic stability: India’s GPI is at 4.65 out of 10 in this parameter. The higher the value, the better is the outcome for the country. Macroeconomic stability also studies government deficit and debts of the respective country.
The Indian rupee has declined by 4.6 per cent. Also, the current account deficit is 1.9 per cent of the GDP in FY’18 compared to 4.8 per cent in 2012-13. The foreign exchange reserves are now at $400 billion as against $275 billion in 2012-13. Although the rupee devaluation may have hit hard, being an emerging market it makes India’s trade became stronger because, for those paying for Indian goods in dollars, the products have become cheaper thus making it more attractive.
Openness to catch up: This parameter maps the Foreign Direct Investment (FDI) stock and total trade of the country. India fares poorly with a score of 1.13 in this regard. It has been recorded that between 2012-17, 116 countries became less open.
FDI is also an indicator of market sentiment. A weaker growth in export-led economy suggests that investors may need to refocus on large established markets. Governments should also note that to bring about the right balance it is important to protect ones domestic industry and be open for trade at the same time.
In 2018, the AT Kearney report suggested that India had dropped out of the top 10 destinations for FDI. This could be because of the implementation related challenges that the country has faced after demonetisation and the launch of the Goods and Services Tax (GST) regime. India ranked eighth in 2017 and is down to 11th in 2018.
Human development: India’s GPI on this parameter is 3.96. The score is much below Japan’s (8.49), Singapore’s (8.42) and that of South Korea’s (8.38).
When human development is weighted, education and life expectancy are also taken into account.
Quality of infrastructure: When compared to Switzerland (9.22), The Netherlands (9.14) and Luxembourg (8.42), India’s score of 3.40 is dismal. This parameter takes into account the quality of transport, technology readiness, availability of financial services, quality of roads, rail, ports, air connectivity, secure internet services, 3G network coverage and broadband penetration as well.
Quality of institutions: Out of all the parameters, India has scored its best in terms of the quality of its public institutions. Switzerland (9.11), Finland (9.11), New Zealand (9.02) and Singapore (8.94) are among the top performers in this regard. To study this quality, KPMG has depended upon a number of factors- levels of corruption, government effectiveness, IP and property rights, judicial and regulatory frameworks and policymaking transparency.
With a GPI of 5.25, India’s institutions are comparable to those in Poland, Italy, Greece, Panama, Slovakia, Kuwait, Indonesia and Trinidad and Tobago. These countries fare better than India in the overall list.
The average of 180 countries taken together suggests that overall debt situation with a GPA score of -1.4 and macroeconomic stability of -1.2 are the two biggest issues impacting these countries. On the other hand, technology readiness and infrastructure are two categories that have seen a positive leap and would be a key driver for GPI over the next 10 years.