7/31/2019 Global Competitiveness of India Definition of Competitiveness

1/2

Global Competitiveness of IndiaDefinition of Competitiveness

World Economic Forum defines competitiveness as the set of institutions, pol icies ,andfactors that determine the level of productivity of a

country.

Productivity determinesthe ability to sustain the level of income of a nation as well

as it decides the return oninvestment.Return on investment in turn decides the economicgrowth potential of a nation.

Pillars of Competitiveness

World Economic Forum has identified 12 pillars of global competitiveness. These are:1. Institutions

The lega l and admin is t ra t ive f ramework wi th in which the government ,

f i rms and individuals interact with each other determines the institutional environment of anation.The quality of institutions have a strong impact on the way corporate and

governmentdecisions are made, the growth drivers are decided and policies are

formulated. Thus, invest ment on fa c tors of p roduc t ions and p rodu ct ive

processes a re governed by the institutional mechanism. Governments

commitment to growth and competitiveness,inclusive growth, corruption,innovation, intellectual property rights, foreign players,infrastructure building etc.

affects the overall macroeconomic outlook of a nation.2. Infrastructure

Ef f ic ien t func t ion ing o f marke t economy, d i s t r ibu t ion o f co rpora te

ou tp ut s re qu ir e effective and extensive infrastructure. Infrastructure also decidesthe kind of industri esand sectors that will drive the economy. Transportation and

communication are two basicinfrastructures for economic growth. Road, rail, air and port

connectivity ensures tradingof goods and services within and across nations.

3. Macroeconomic StabilityInstable macroeconomic conditions like too high interest rates; high inflations, uncertain price

fluctuations, fiscal deficit etc. are detrimental to the economic health of a nation.

4. Health and Primary Education

Hea l th o f the p roduc t ive human resource i s an impor tan t a sse t to theor ga ni za ti on . Workers with illness and health problems could drag the growth rate

down. Primaryeducation level makes workers more productive and improves their ability to

perform oncritical situations.5. Higher Educations and Training

The rapidly changing business environment requires qualified workforce who can adaptto the

ever-changing business environment and can act as change catalysts withintheorgan iza t ion . Aga in na t ions tha t s t r ive to move up the va lue c ha in f rom

t h e s im pl e production sectors to complicated processes and products.

6. Goods/Services market efficiencyMarket efficiency encourages productive players to participate in economic activities thatcou l d

genera te va lue fo r the na t ion . Marke t e f f i c iency ensures tha t t a s te , cho ice

a nd preferences of the consumers are reflected in the market. Efficient trading ofgoods andservices encourages both domestic and foreign players to play roles in the market

system.This increases competition, which ultimately makes the market system more competitive.

7. Labor Market Efficiency

7/31/2019 Global Competitiveness of India Definition of Competitiveness

2/2

Labour market efficiency creates a level playing field for the wo rkers in order to

attract best of the talents. It also ensures effective allocation of human resource andmotivateslabors to give their best performance.

8. Financial Market Sophistication

Sophis t i ca ted f inanc ia l marke t genera tes fa i th in the inves to rs th rough

in fo rm at io n symmetry. Financial market channelizes the savings of budget surplusplayers of theeconomy towards the budget deficit players with the ability to generate

maximum returnsfor the economy. Sound banking sector, well regulated exchange boards,

effective central bank etc. makes the financial market efficient.9. Technological readiness

Agility with which a nation and its industries adapt to the changing technology is crucial.Up

gradation of the system to fit into the new technology helps to achi eve an edgeover others. It is more crucial when it comes to Internet and Telecommunication Technologyas

these technologies have their impacts on almost all industrial sectors.

10. Market Size

Bigger market size is instrumental to achieve economies of scale. With globalization it

is possible to explore foreign markets to reap the benefits of scale.11. Business Sophistication

Q u a l i t y o f c o u n t r i e s o v e r a l l b u s i n e s s n e t w o r k s a n d q u a l i t y o f

f i r m s i n d i v i d u a l operational excellence and strategy decides overall business

sophis ticat ion . It helps to foster responsiveness and innovation.

12. InnovationInnovation is inevitable for long-run benefits. Investment on Research and Development(R & D)

activities brings innovation. Innovation is more important as countries approachfrontiers of

knowledge.