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India ranks 70th on Prosperity Index

Wednesday, October 22, 2008 Wednesday, October 22, 2008

The quality of secondary education, cost of starting a business & the lack of government effectiveness are among the reasons why India ranked 70th among 104 nations on the World Prosperity Index (WPI) 2008.

"India has a relatively entrepreneurial culture. It requires government effectiveness & tackling corruption," Managing Director of Legatum Institute, that has brought out the Index, Alan McCormick told PTI.

Increase in capital & education contribute directly to the value of physical & human capital & thus, directly increase economic output. Poor governance & excessive bureaucracy impose costs on business and thus restrain growth, the report released last week said.

The Institute also ranks India at 10th place on its 'Who's Going Places' list, with China on number six.

"These countries have the best context right now within which to create wealth," McCormick said.

Both economies have recently grown faster than almost any country in the rich world. Because these two giant nations are home to more than 2 billion people, these improvements in competitiveness are bringing about a dramatic lessening of the global wealth gap & are very good news for global prosperity, the report said.

"India outstrips many South Asian nations in various aspects of wealth creation. It ranks stronger with reference to other Asian countries in terms of avoiding dependence on commodity exports & foreign aid," McCormick said.

The Index, which calculates a country's prosperity on the basis of 'Economic Competitiveness' & 'Comparative Liveability', has been prepared by assessing drivers of prosperity based on 22 key indicators and 44 sub-indicators.

Australia tops the overall Index, Austria has top scores in education, & in health & Finland boasts excellent governance, the report said.

All the top 29 countries in the overall Prosperity Index score half a standard deviation or more above the global mean on good governance, the report said.

India has an exceptionally weak score in commercializing new ideas via entrepreneurship, a factor which the Index identifies as a major contributor to growth. India's score in terms of entrepreneurship is surprisingly better than Austria at 2 & Canada at 14. It, however, is doing a lot in terms of commercializing innovation.

"One of the measures we use to analyze innovation is the number of patents registered by a country with the World Intellectual Organization.

When a country is issuing lots of patents it indicates that there is a lot of research & development taking place within the country & importantly, it is being commercialized. India has increased its patents rapidly over the last few years, most notably in the pharmaceutical sector," McCormick said.

Singapore & Hong Kong have a remarkably high score in commercializing new ideas via economic openness.

Neighboring Sri Lanka, which ranks 60 on the Index, beats India at it by scoring high on commercializing new ideas via education & entrepreneurship & building social support through family & community life.

Australia ranks higher in terms of investing productively via good governance, commercializing new ideas via better education & building social support through community life, in all of which India scores low.

Germany at Number 4, Kuwait at 30, Russia at 57, Mongolia at 77 score comparatively higher than India in terms of commercializing new ideas via education.

This is the 2nd year in succession that the Institute has come up with the Prosperity Index. In 2007, only 50 countries were analyzed as compared to 104 this year.

"India was featured in last year's Index & was ranked 46th of 50 countries analyzed. Although comparisons between 2007 & 2008 rankings are nor valid due to changes in methodology of survey, the drivers & restrainers of India's prosperity are quite similar to last year," Legatum Corporate Communications Hamish Banks said.

"They include significant weaknesses in economic openness, entrepreneurship & higher standards of education; health issues remain a problem, but religious belief is a strength," Banks said.

Almost all of the countries that ranked lower than India last year - Pakistan, Zimbabwe & Bangladesh - are again ranked lower in 2008 with the exception of Egypt, which is now ranked very slightly higher than India, at 67, he said.

On a plot of 'competitiveness' & 'liveability', India comes in the bottom left quadrant, neither liveable nor competitive as opposed to Australia, Japan & Singapore that are both competitive & liveable, Russia & Ukraine that are more competitive than liveable & Saudi Arabia & Venezeula that are more liveable than competitive.