India is world’s 40th most competitive economy: WEF

The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.

India has been ranked as the 40th most competitive economy — slipping one place from last year’s ranking — on the World Economic Forum’s global competitiveness index, which is topped by Switzerland.

On the list of 137 economies, Switzerland is followed by the US and Singapore in second and third places, respectively.

In the latest Global Competitiveness Report released today, India has slipped from the 39th position to 40th while neighbouring China is ranked at 27th.

“India stabilises this year after its big leap forward of the previous two years,” the report said, adding that the score has improved across most pillars of competitiveness. These include infrastructure (66th rank), higher education and training (75) and technological readiness (107), reflecting recent public investments in these areas, it added.

According to the report, India’s performance also improved in ICT (information and communications technologies) indicators, particularly Internet bandwidth per user, mobile phone and broadband subscriptions, and Internet access in schools.

However, the WEF said the private sector still considers corruption to be the most problematic factor for doing business in India.

“A big concern for India is the disconnect between its innovative strength (29) and its technological readiness (up 3 to 107): as long as this gap remains large, India will not be able to fully leverage its technological strengths across the wider economy,” it noted.

Among the BRICS, China and Russia (38) are placed above India.South Africa and Brazil are placed at 61st and 80th spots, respectively.

In South Asia, India has garnered the highest ranking, followed by Bhutan (85th rank), Sri Lanka (85), Nepal (88), Bangladesh (99) and Pakistan (115).

“Improving ICT infrastructure and use remain among the biggest challenges for the region: in the past decade, technological readiness stagnated the most in South Asia,” WEF said.

Other countries in the top 10 are the Netherlands (4th rank), Germany (5), Hong Kong SAR (6), Sweden (7), United Kingdom (8), Japan (9) and Finland (10).

The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.

Institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation are the 12 pillars.

According to WEF’s Executive Opinion Survey 2017, corruption is the most problematic factor for doing business in India.

The second biggest bottleneck is ‘access to financing’, followed by ‘tax rates’, ‘inadequate supply of infrastructure’, ‘poor work ethics in national labour force’ and ‘inadequately educated work force’, among others.

The survey findings are mentioned in the report.

“Countries preparing for the Fourth Industrial Revolution and simultaneously strengthening their political, economic and social systems will be the winners in the competitive race of the future,” WEF founder and Executive Chairman Klaus Schwab said.

Modi, Putin agree to expand nuclear power plant, push defence ties

India and Russia signed five pacts, including a crucial agreement on setting up two more atomic power plants at Kudankulam

India and Russia on Thursday reaffirmed their “special and privileged strategic partnership” and signed five pacts, including a crucial agreement on setting up two more atomic power plants at Kudankulam in Tamil Nadu, as Prime Minister Narendra Modi and President Vladimir Putin discussed ways to smoothen bilateral relations.

The pacts were signed in St Petersburg on the third leg of Modi’s four-nation, six-day tour of Europe. Modi is in St Petersburg for the 18th India-Russia annual summit as well as the St Petersburg International Economic Forum.

The two countries are also marking 70 years of the establishment of diplomatic relations between them this year.

“Met President Putin. We had a wonderful meeting during which we discussed India-Russia relations,” Modi wrote in a Twitter post after a one-to-one meeting with the Russian leader.

The highlight of the day was India and Russia concluding a much-awaited pact for setting up the last two units of the Kundankulam nuclear power plant with Moscow’s help. The general framework agreement (GFA) and credit protocol for units 5 and 6 of the Kudankulam nuclear plant was among the five pacts signed on Thursday.

The reactors will be built by Nuclear Power Corporation of India Ltd (NPCIL) and Russia’s JSC Atomstroyexport, a subsidiary of Rosatom, the regulatory body of the Russian nuclear complex. Each of the two units will have a capacity to produce 1,000 megawatt (MW)of power. One 1,000MW nuclear power plant in Kudankulam is operational while another 1,000MW capacity plant is expected to go on stream later this year. Two others of equal capacity are under construction. India’s current nuclear power generation capacity is about 7,000MW.

A joint statement noted that the economies of India and Russia complemented each other in the energy sector and both countries will strive to build an “energy bridge”. It said the future of Indian-Russian cooperation holds great promise across a wide spectrum covering nuclear power, nuclear fuel cycle and nuclear science and technology.

Traditionally, India and Russia have shared a close relationship that dates back to the days of the Cold War, when the US tilted toward India’s neighbour and arch rival Pakistan. Much of India’s military hardware is still of Russian origin though India has diversified its defence procurement with major purchases of military hardware from the US, Israel and France.

On its part, Russia has been concerned at the rapidly warming ties between India and the US including the recent signing of a military logistics agreement.

India’s concerns vis-à-vis its once “trusted strategic partner” include its present tilt towards China with which India has a difficult relationship mainly due to an unsettled border dispute and Beijing’s close ties with Pakistan. Last year, Russia held its first ever military exercises with Pakistan, raising concerns in India.

Once seen as on the same page vis-à-vis concerns on terrorism emanating from Pakistan and Afghanistan, currently there are divergences between New Delhi and Moscow on that issue as well with Russia favouring a role for the rebel Taliban in a future Afghanistan against the rise of the Islamic State in the war-torn country. That Russia did not back India’s demand to name two Pakistan-based terror groups as perpetrators of terrorism against India last year at the Goa Brics (Brazil-Russia-India-China-South Africa) summit did not go down well with India.

In an interview to PTI on Thursday, Putin tried to assuage some of India’s concerns. “Russia is respectful toward all Indian interests,” Putin said. “Russia does not have any tight military relations with Pakistan.”

Putin added: “No matter where terror threat comes from, it is unacceptable and Russia will always support India in fight against terror.”

“There is no other country in the world that Russia has “deep cooperation” in delicate areas such as missiles,” Putin said adding Russia’s “trust-based” ties with India will not be diluted by Moscow’s growing ties with Pakistan and others.

The statement also said that India and Russia were looking to expand trade from the current $ 7.7 billion level to $ 30 billion by 2025.


Vizag, 4 other cities lead the way under smart cities mission

Visakhapatnam along with four other cities — Pune, Bhubaneshwar, Surat and Ahmedabad — is leading the progress made under the first round of the government’s flagship scheme.

Mission Director (Smart Cities) Sameer Sharma told BusinessLine, “We have reviewed the progress of Visakhapatnam under the smart cities mission with the consultants and CEO of the special purpose vehicle (SPV) formed. Under the project, development of footpaths will go for bidding by October 31; water supply for the city by September 30, sewerage also by September 30, etc.”

Visakhapatnam had ranked eighth in the first round of the smart cities challenge.

On the overall progress made, he added that all 20 cities in the first round have already formed SPVs and most have readied Production Management Contracts ( PMCs) also. “Projects across all these cities are expected to kick-start by December,” Sharma said at the sidelines of the 3rd BRICS Urbanisation Forum here.

In January this year, 20 winning cities which were announced under the first round covered only 12 States and Union Territories. The government had then decided to conduct a ‘fast-track competition’ to offer an opportunity to the highest ranked city in each of the unrepresented 23 States and UTs. In May this year, the Ministry of Urban Development had announced 13 more winners of the smart city tag under the fast-track round.

On the progress under this round, Sharma said, “Out of the 13 selected in the fast-track round, six cities, including Panaji, Chandigarh, Port Blair, Lucknow, have formed SPVs and remaining seven are in the last stage of formation of SPV and are expected to do so by the end of this month.”

Moreover, on Monday, the Centre will announce 27 more cities which will bag the smart city tag.


Funding plans

Meanwhile, the government is also pursuing a loan of $1 billion from Asian Development Bank and another $500 million from the World Bank to provide funds to the city SPVs, apart from Japanese International Cooperation Agency ($500 million), BRICS Bank ($ 500 million per city), AFD (€100-200 million).

“The funds from World Bank are expected to flow in 6 months. It will be in phases,” Sharma added.

India moots framework for SME sector cooperation in BRICS

India is working on a mechanism to boost cooperation amongst small and medium enterprises in the five-nation BRICS to promote joint ventures and share expertise on strengthening the sector.

New Delhi, which holds the Presidency of the BRICS this year, is drafting a framework for a joint growth strategy for micro, small and medium enterprises (MSMEs) in the region. “The framework for cooperation amongst MSMEs, which will identify the relative strengths of each country and also possible areas of joint ventures, will be discussed at the next meeting of officials in June and hopefully finalised at the BRICS ministerial meet in October,” a government official told BusinessLine . MSMEs in Brazil, for instance, are highly successful in participating in government procurements, he said, adding that they “capture almost 90 per cent of the business. Other countries could draw from Brazil’s legislative frameworks and other policy initiatives to help their small industry also get a chunk of government business.”

The BRICS grouping of five emerging economies — Brazil, Russia, India, China and South Africa — together account for a GDP of over $16 trillion, which is about half that of the seven major advanced economies. More than 40 per cent of the BRICS economies are driven by the MSME sector, according to government estimates.

The Commerce and Industry Ministry is also holding discussions with the industry to give a final shape to its proposal of putting in place a BRICS portal for addressing non-tariff measures (NTMs) that hamper trade between the BRICS.

Exporters’ body FIEO is one of the industry bodies giving inputs for the proposed portal.

“One of the biggest problems faced by exporters in the five countries is the lack of knowledge on various non-tariff measures (NTMs), such as new standards or specifications. Most of the times they get to know about the NTMs only when their goods are rejected. If this issue is addressed, it will serve as a big incentive for industry in the five nations to trade with each other,” said Ajay Sahai of FIEO.


IMF knowledge sharing center to come up in India

In a first for Asia, the International Monetary Fund (IMF) will set up a knowledge-sharing centre in India, to provide technical support and assistance here and to five other South Asian nations. Their team will extend expertise in core macroeconomic and financial management areas, said an unnamed government source. An agreement is likely to be signed here on Saturday by IMF Managing Director Christine Lagarde with Prime Minister Narendra Modi.

The new IMF centre, being set up amid global economic uncertainty, will provide assistance to India, Nepal, Bangladesh, Sri Lanka, Pakistan and Bhutan. Since the IMF team will be based out of the region, it will ensure better understanding of regional concerns, including trade, agriculture, climate change, facilitating a reform process and support to regional integration. The knowledge centre will come up in the wake of IMF announcing implementation of its long-pending quota reform, giving more voting rights to emerging economies.

With these changes, to be effected in the coming days, India’s quota in the IMF would rise to 2.7 per cent from the existing 2.44 per cent. Also, the voting share of India would increase to 2.6 per cent from 2.34 per cent. For the first time, four emerging market (EM) countries of the Brics bloc — Brazil, China, India and Russia — will be among the 10 largest members of IMF.

Two new multilateral agencies are also being set up — a New Development Bank of the Brics countries and an Asian Infrastructure Investment Bank.

An Asian economic crisis did occur in the late 1990s but from the Southeast Asian ‘tigers’ of that time. This time, one could emanate from China or another large economy from the EMs. According to the Economic Survey of 2015-16, if this kind of crisis does emerge, it would be very different from those of earlier decades. Since the 1980s, it said external financial crises have followed one of three basic forms — Latin American, Asian or global models.

In a Latin American debt crisis, governments went on a spending binge, financed by foreign borrowing (of recycled petrodollars) while pegging their exchange rates. In the Asian one of the late 1990s, the transmission mechanism was similar — overheating and unsustainable external positions under fixed exchange rates — but the instigating impulse was private borrowing rather than governnment borrowing.

The global one of 2008, with America as its epicentre, was unique in that it involved a systemically important country and originated in doubts about its financial system.

If a crisis occurs in China or another large EM, it is more likely to resemble events of the 1930s, when the UK and then the US went off the gold standard, triggering a series of devaluations by other countries and leading to a collapse of global economic activity.

If such a crisis hits India, it will require fresh prescriptions and it is here that the IMF centre would be of help, a source said.


Brics bank may give first loans to India, China in their currencies

The New Development Bank (NDB), referred to as Brics bank, may give the first batch of loans to India and China in their respective currencies in April, sources said, even though the default operating currency of the NDB is US dollar.

The New Development Bank (NDB), referred to as Brics bank, may give the first batch of loans to India and China in their respective currencies in April, sources said, even though the default operating currency of the NDB is US dollar.

The move is aimed at allowing the new multilateral agency headquartered in Shanghai to use a larger basket of currencies for lending and borrowing.

The NDB could raise funds by issuing rupee bonds in India or rupee-linked bonds overseas (masala bonds) for its rupee loans operations in the country.

In the past, the Asian Development Bank (ADB) has issued both domestic and overseas rupee bonds to finance projects in India.

The NDB, set up earlier this year, has an authorised capital of $100 billion. To start with, the it would begin with $50-billion subscribed capital, split equally among BRICS (Brazil, Russia, India, China and South Korea) countries.

It will scale up later by inducting more countries as members and raise resources from the market.

India, which needs $1-trillion investment in infrastructure in five years through 2017, could be one of the big beneficiaries of the new institution. The country is already the largest borrower of the World Bank and the ADB.

Even though NDB, sources said, is likely to give loans in local currencies to India and China, it would stick to US dollar as the default currency for raising funds from global markets as well in its lendings to countries. Exceptions will be made depending on the appetite for local currency loans in member countries, sources said.

With the process of operationalising the NDB (on the lines of the World Bank) gathering momentum, its board of directors met on November 20 to discuss and frame draft lending, borrowing and environmental policies for the bank before it commences operations in early 2016.

These norms will be ratified by the board of governors in March-April.

In the meantime, a pipeline of projects are being readied to seek the board of governors’ approval. India has already submitted three proposals including the Centre’s Green Energy Corridor and Grid Strengthening Project for evacuation power from renewable energy sources such as solar.

In this project, the NDB could be a co-financier along with the World Bank and the Asian Development Bank, sources said.

Two other projects sent to the NDB relate to a power project as well as an irrigation project in Rajasthan.

More projects will be sent to the bank after state governments submit their proposals to the Centre, sources said.



Commerce ministry firming up Africa-focused export strategy

The commerce department is firming up an export strategy focused on Africa, giving a new dimension to the government’s strategic push for ties with the continent that could offer a large market for Indian goods at a time of slowing global demand.

While India has offered a $10 billion credit line to Africa, the department has extended the benefits under the Merchandise Exports from India (MEIS) scheme to many goods headed for Africa to make the most of this credit. Senior government officials led by commerce minister Nirmala Sitharaman will next week apprise Parliament’s consultative committee on plans to address India’s continuously falling exports, with a focus on Africa and the country’s neighbours. The meeting is to be in held in Goa on November 6-7.

“Since the situation is not good globally, we have decided to focus on exports to Africa and our neighbouring countries. We can use our competitiveness in these markets to increase exports. We are working on an export strategy for next week’s meeting,” said a commerce department official, who did not wish to be named.
At the meeting the committee will also discuss Foreign Trade Policy (FTP) 2015-20 and its implications on exports, the official said. The steady decline in exports has triggered apprehensions that India may even miss last year’s exports figure of $310.5 billion. Merchandise exports fell nearly a quarter in September, the tenth straight month of decline, raising worries that shipments may fall short of last year’s levels.
The Directorate General of Foreign Trade (DGFT) has included exports of textiles and ready-made garments including cotton fabrics, both woven and knitted, and made-ups to the African countries under the MEIS. The industry, which has been grappling with falling exports, has approved of this strategy.

Following the revision, exports of value-added and labour intensive products such cotton dyed and printed fabrics, and made-ups, to African countries such as Mauritania, Mali, Niger, Benin, Angola, Senegal, Togo, Ghana, Kenya and Tanzania are expected to receive a huge boost. “This is a very positive step taken by the government and has come as a huge relief to the exporters of cotton textiles who are faced with declining exports,”Texprocil chairman RK Dalmia said in a statement.