The quality of secondary education, cost of starting a business and 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 and tackling corruption," Managing Director of Legatum Institute, that has brought out the Index, Alan McCormick told PTI.
Increase in capital and education contribute directly to the value of physical and human capital and thus, directly increase economic output. Poor governance and 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 two billion people, these improvements in competitiveness are bringing about a dramatic lessening of the global wealth gap and 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 and foreign aid," McCormick said.
The Index, which calculates a country's prosperity on the basis of 'Economic Competitiveness' and '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 and in health and 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 commercialising 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 and Canada at 14. It, however, is doing a lot in terms of commercialising innovation.
"One of the measures we use to analyse innovation is the number of patents registered by a country with the World Intellectual Organisation.
When a country is issuing lots of patents it indicates that there is a lot of research and development taking place within the country and importantly, it is being commercialised. India has increased its patents rapidly over the last few years, most notably in the pharmaceutical sector," McCormick said.
Singapore and Hong Kong have a remarkably high score in commercialising new ideas via economic openness.
Neighbouring Sri Lanka, which ranks 60 on the Index, beats India at it by scoring high on commercialising new ideas via education and entrepreneurship and building social support through family and community life.
Australia ranks higher in terms of investing productively via good governance, commercialising new ideas via better education and building social support through community life, in all of which India scores low.
Germany at number four, Kuwait at 30, Russia at 57, Mongolia at 77 score comparitively higher than India in terms of commercialising new ideas via education.
This is the second year in succession that the Institute has come up with the Prosperity Index. In 2007, only 50 countries were analysed as compared to 104 this year.
"India was featured in last year’s Index and was ranked 46th of 50 countries analysed. Although comparisons between 2007 and 2008 rankings are nor valid due to changes in methodology of survey, the drivers and 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 and 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 and 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' and 'liveability', India comes in the bottom left quadrant, neither liveable nor competitive as opposed to Australia, Japan and Singapore that are both competitive and liveable, Russia and Ukraine that are more competitive than liveable and Saudi Arabia and Venezeula that are more liveable than competitive.
