Western reports placing India as best business destination also suggest India’s extreme lag in social sector

capexBy Rajiv Shah*

Recently, there have been series of “studies”, claiming that India has become a favourable investment destination because of the economic freedom it offers. Despite ranking India very high – No 1 in some cases – a scan through these reports gives a contradictory picture. While those that deal with purely economic governance issues, but do not touch social issues, easily place India as the best of all, those that address the social sector and its governance find things are not as rosy as they may seem. Worse, none of the reports, while addressing economic freedom or India as the best investment destination, finds even the slightest need to address issues of human rights, civil liberties and environment, as if they are not related with overall working of of the economy.

The latest in the series is the Financial Times (September 29) published a report titled “India grabs investment league pole position”, by  Courtney Fingar, says, India, experiencing “one of best foreign direct investment (FDI) growth rates in a year when many major destinations posted declines”, has outstripped its rivals, “bucking a downward trend among emerging markets.” In fact, it underlines, “India is in pole position to pass both China and the US in the FDI league tables this year. With midyear data on greenfield FDI now in, 2015 looks to be a milestone year for India following its impressive performance in 2014.”

Fishing out figures to prove its point, the article says, “India ranked fifth last year for capital investment, after China, the US, the UK and Mexico. In a year when many other major FDI destinations posted declines, India experienced one of 2014’s best FDI growth rates, increasing its number of projects by 47 per cent.” It adds, “This could shape up to be an even better year for investment into India. A ranking of the top destinations for greenfield investment (measured by estimated capital expenditure) in the first half of 2015 shows India at number one, having attracted roughly $3bn more than China and $4bn more than the US…  India is tracking well ahead of where it was at this time last year: it has more than doubled its midyear investment levels, attracting $30bn by the end of June 2015 compared with $12bn in the first half of last year.”

Earlier, prominent US journal “Foreign Policy”, owned by the FP Group, a division of Graham Holdings Company, formerly the Washington Post Company, had declared that India has told a “the big story in the Baseline Profitability Index (BPI) this year is India,  coming out on top.” It claimed, the country’s “growth forecasts are up, perceptions of corruption down, and investors better protected following the election of a government led by Prime Minister Narendra Modi.”

A one-man job, the report was prepared by Daniel Altman, who is senior editor, economics, at “Foreign Policy”, and is an adjunct professor at New York University’s Stern School of Business. The high-profile report finds India’s BPI at 1.32, placing it at No 1, followed by Quatar at No 2 with a BPI of 1..28, Botswana at No 3 with a BPI 1.27, Singapore at No 4 with a BPI of 1.22, and Ghana at No 5 with a BPI of 1.21. The United States, the report says, has a BPI of 1.01 with a ranking of No 50, the United Kingdom a BPI of 1.00 with a ranking of No 64, China a BPI of 0.99 with a ranking of No 65, and Japan a BPI of 0.98 with a ranking of No 74.

Wondering “where exactly should they put their money”, the report insists, “Modi’s India is the place to start”; it advises investors, if they invested in India, this is the country which would give them “a better idea of how big the return will be when it finally reaches your pocket.” Pointing out that it’s a “great time to be an international investor”, it advises investors to invest in India especially when “most countries crippled by the global financial crisis.”

A third report – which is more significant than the other two – is by the World Economic Forum (WEF), which points out that, after five years of decline, India has “jumped” 16 ranks to 55th place in global competitive index.  The report, titled “Global Competitive Report 2015-16”, gives full mark to the “momentum initiated by the election of Narendra Modi, whose pro-business, pro-growth, and anti-corruption stance”, though at the same time underlines, “Business leaders still consider corruption to be the biggest obstacle to doing business in the country.” Yet, the WEF report calls the situation on the macroeconomic front “worrisome.” Even as pointing out that India is the third biggest market in the world, up for grabs for global investors, this is the only report which seeks to address the economic freedom index in context of overall development in the social sector.

The WEF report does suggest that, while India may have jumped 16 places in the competitive index, the latest ranking at 55th position among 140 countries – up from the 71st position in 2014-15 – is still not good enough. After all, despite the “massive jump”, which follows five years of a decline on the list, India still ranks seven notches lower than it did in 2007, when the UPA government was strong and in power. Further, even as agreeing that “inflation eased to 6 percent in 2014, down from near double-digit levels the previous year”, the report says, issues of “technological readiness” particularly need attention. India remains “one of the least digitally connected countries in the world”, it says, adding, “Fewer than one in five Indians access the Internet on a regular basis, and fewer than two in five are estimated to own even a basic cell phone.”

To give an idea, the WEF’s ranking of India in the use of technology is one of the poorest in the world from among the 140 countries which have been ranked. Thus, in mobile telephone subscriptions it is 121st, in fixed-telephone lines it is 116th, in availability of latest technologies it is 108th, in firm-level technology absorption it is 102st, in individuals using Internet it is 107th, in fixed-broadband Internet subscriptions it is 104th, in international internet bandwidth it is 116st, and in mobile-broadband subscriptions 124th.

Coming to the social sector and its impact, the WEF’s ranking for India is equally poor. Thus, as follows: In tuberculosis cases it is 113rd, in business impact of tuberculosis it is 132nd, in business impact of HIV/AIDS it is 130th, in infant mortality it is 114th, in life expectancy it is 107th, in secondary education enrollment it is 105th, in Internet access in schools it is 100th, and so on.

And on the issues of economy and governance, India’s ranking is as bad. Thus, in inflation it is 105th, in general government debt it is 103rd, in government budget balance it is 131st, in organized crime  it is 119th, in business costs of terrorism it is 126th, in property rights it is 103rd, in number of procedures to start a business it is 129th, in number of days to start a business it is 110th, in trade tariffs it is 124th, in imports as a percentage of GDP it is 116th, in flexibility of wage determination  it is 120th, in women in labour force as ratio to men it is 132nd, and in soundness of banks it is 100th.

A fourth report, which has largely gone unnoticed, but was released about the time Prime Minister Narendra Modi was meeting Facebook founder Mark Zuckerberg in the US in September last week, has found that India has slipped in global ranking for the use of internet, both broadband and internet in general. Sponsored jointly by UNESCO and International Telecommunication Union (ITU), and released by UN secretary-general Ban Ki-moon, the report, “State of Broadband 2015: Broadband as Foundation of Sustainable Development”, dated September 2015, ranks India 131st in the fixed broadband subscription category and 155th in the mobile broadband subscription category among 189 nations of the world.

The report says that India has 1.2 per 100 capita fixed and 5.5 mobile per 100 capita broadband penetration. A comparison with BRICS nations suggests as India ranks worst both in fixed and mobile broadband. In fixed broadband, Russia ranks 56th with 17.5 per 100 capita, China 67th with 14.4 per 100 capita, Brazil 76th with 11.5 per 100 capita, and South Africa 110th with 3.2 per 100 capita. And as for mobile broadband, Brazil 27th with 78.1 per 100 capita, Russia 40th with 65.9 per 100 capita, South Africa 69th with 46.7 per 100 capita, and China 78th with 41.8 per 100 capita.

The earlier report, released exactly a year ago, in September 2014, had found that India ranked 125th in fixed broadband subscription with 1.2 per 100 capita penetration, and 113th in mobile broadband subscription with a 3.2 per capita penetration, suggesting a sharp slip internationally on both the counts. The data come close on the heels of experts doubting the possibility of Digital India’s ability to take internet to every doorstep in India, a goal Modi has set for himself. Prepared by the Broadband Commission for Digital Development, the report is has been prepared in response to the UN Secretary-General’s call to step up efforts to meet the Millennium Development Goals (MDGs). Established in May 2010, the Commission unites government leaders, top industry executives, thought leaders, policy pioneers, international agencies and organizations concerned with development.

The 2015 report also finds that, with 15.3 per cent of households having internet, India ranks No 80 among 133 developing countries. The 2014 report had had found that, with 13 per cent households having internet, India ranked No 75 among developing countries. The only consolation for India is, in Pakistan, 13 per cent households have internet connections, with its ranking being 83rd among developing countries. Sri Lanka’s household internet penetration is equal to that of India.

Further, the 2015 report finds that in India 18 per cent individuals use internet, but this is worse than 135 other nations out of a total of 191. Iceland tops the list with 98.2 per cent individuals using internet, followed by Norway 96.3 per cent, and Denmark 96 per cent. In United Kingdom 91.6 per cent individuals use internet, in Japan 90.6 per cent, in the United States 87.4 per cent, and so on.
Coming to the BRICS countries on this score, again, India is again the worst performer. In in Russia 60.5 per cent individuals use internet (ranking No 44), in Brazil 57.6 per cent (ranking No 68), in China 49.3 per cent (ranking No 82), and in South Africa 49 per cent (ranking No 84).

*Senior journalist

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