Indra’s Drishtikona (Viewpoint)

Two Sets of Indexes, and India’s Competitiveness

Posted : April 16, 2005 at 12:40 pm [IST]

Recently, our great President in course of one of his addresses used some global competitiveness indexes and pleaded to set a target to for the nation to achieve. “Competitiveness comes from technology, administration, management, work environment and employee productivity. India is ranked 56 in terms of Growth Competitive Index and 127 in terms of Human Development Index. We have to work together to become 10 in the Growth Competitive Index and 20 in Human Development Index.” We have a number of such indexes prepared by very reliable agencies. The government and administration must use the different global rankings from reputed agencies that appear quite often, use them as guideline and judge their performances on that basis.

Prescription # 6

Take the initiatives to improve on the global competitiveness ratings already available from the reliable and recognized agencies. Increase the creative class in number as well as quality. Let the professional institutes and laboratories concentrate on both- pure technology as well as applied technology to improve the quality of life of the people. Use synergy. Work in virtual research clusters. They can’t remain exclusive. Next world war will be fought in research labs and educational institutes through worldwide connectivity tools.

Let us look at two indexes and take steps to improve upon that to keep our lead. Good thing is that relates to the intelligentsia of the country. So let there be no excuses put forward to go ahead.

Outsourcing is perhaps one sector where India’s strength has been recognized outright. However, perhaps everyday some or other report or news appears about the Chinese threat to surpass India.

The Global Outsourcing Index

Recent Global outsourcing Report 2005 has come out with two measures: the Global Outsourcing Index (GOI) and the Future Outsourcing Index (FOI) in the outsourcing business. Mark Minevich of Going Global Ventures Inc.and Dr. Frank-Jurgen of HORASIS have produced the report. It rates each country on the basis of a combination of relative cost, risk, and market opportunity. The Global Outsourcing Index (GOI) provides the current competitiveness of doing outsourcing work in the top 20 countries. The Future Outsourcing Index (FOI) assesses the competitiveness over the next 10 years in the 30 countries.

India appears at Number 1 position in GOI (2005) followed by China, Costa Rica (Is it not surprising?), Czech Republic, and Hungary, with Brazil at number 15 and Russia at 6.However, in FOI (2015), China takes the Number 1 position followed by India, USA (3), Brazil (4), and Russia (5).

IT outsourcing and BPO has a huge potential and India is having certain lead already. An IDC estimates the global BPO market at about $1.2 trillion in 2006 as against $300 billion in 2004. Gartner expects offshore IT spending to reach $50 billion by 2007.
So, there’s a huge opportunity. An estimate claims that BPO can provide an employment opportunity to the extent f 45 million Indians.

Can India cash on this opportunity and bring out a large number of households out of poverty to live with a better quality of life? What is India going to do? Can it not take care of the risk dimensions effectively?

And what are those risks? Here is the list:

Geo-political risk: stability of government, corruption, geopolitics, and security.)
Human capital risk: quality of educational system, labor pool, number of new IT graduates.
IT competency risk: project management skills, high-end skills and competence (customer code writing, system writing, R&D, business process experience)
Economic risk: currency volatility, GDP growth.
Legal risk: overall legislation, tax, and intellectual property.
Cultural risk: language compatibility, cultural affinities, innovation, and adaptability.
IT infrastructure risk: IT expenditure, quality of key access infrastructure.
Market opportunity rating: expert third party analysis of each country, its global competitiveness and IT market share
Cost: compensation and wages, infrastructure cost, and tax and regulatory cost.

Can the country as a whole make a policy deployment to the bottommost level to improve on the risk factors to be globally competitive?

Another Global Index: The Global Creativity Index

Richard Florida, the best selling author of ‘The rise of the Creative Class‘ has come out a Global Creativity Index in his latest book ‘The Flight of the Creative Class’. His creative class includes scientists, engineers, artists, cultural creatives, managers, professionals, and even technicians. The creative class is a strongly and positively associated with the economic output or GDP of a country. The index that he talks of is intended to serve as a measure of a country’s base of creative talent, which affects growth only through its interaction with a broad range of other factors.

The Global Creativity Index has some other talent, technology, and tolerance measures:

Talent Measures:
1. The Human Capital Index is based on the percentage of a country’s population holding a bachelor’s degree. (Source: OECD 2001)
2. The Scientific Talent Index represents the number of researches per million people. (Source: UNESCO 1999-2001)
3. The overall talent Index combines the 3 talent measures- creative class, Human Capital Index, and Scientific Talent Index.
Creative class data were not available for some countries including China, India, and Brazil. So the average of the other two talent indicators have been used to estimate the country’s Talent Index scores.

Technology Measures
1. The R&D Index measures R&D expenditures as a percentage of Gross Domestic Product. (Source: World Bank 1999-2002)
2. The Innovation Index measures the number of patents granted per million people. (Source: US Patent & Trademark Office 2001)
Tolerance Index Measures
1. The Value Index measures the degree to which a country espouses traditional as opposed to modern or secular values. (Based on a series of questions about attitudes towards God, religion, nationalism, authority, family, women’s rights, divorce, and abortion.)
2. The Self Expression Index captures the degree to which a nation values individual right and self-expression. (Based on questions covering attitudes towards self-expression, quality of life, democracy, science and technology, leisure, the environment, trust, protest politics, immigrants, and gays.)

The World Value Survey is based on national samples that average approximately 1,400 respondents per country. Ronald Inglehart provided it from inter- University consortium for Policy and Social research survey data archive at the University of Michigan,

The Global Creativity Index (GCI) is made up of an equally weighted combination of the Talent Index, the Technology Index, and the Tolerance Index. The country values for each indicator were normalized on a scale from 0 to 1. GCI is intended to capture the ability of a country to harness and mobilize creative talent for innovation, entrepreneurship, industry formation, and long-run prosperity.

India is positioned at 41 against China at 36, Russia at 25, and Brazil at 43 out of 45 countries included in the list. What does it all mean?

India must work to increase its creative class, number of graduates passing every year, researchers in laboratories and institutes, R&D expenditures in both private and public sectors, and number of patents applied every year. The country must emphasize on research and development through good remunerations, rewards and awards, and overall academic environment to attract younger generations. Indian researchers and professors must get into applied areas too and publish papers and apply for patents on their innovations. Simultaneously, a drive through huge number of NGOs in the country may carry the message of two child only at least for those who can’t afford proper education and health care. There are no human rights issues involved in this drive.

- Indra

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