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A strong and productive workforce have helped to boost India’s ranking in the Grant Thornton Global Dynamism Index (GDI) which ranks the business growth environments of 60 leading economies. The country has gained 14 places since the last version of the index, rising to rank 34. However, it has ranked 53rd out of 60 in the GDI when it comes to its business operating environment.
A rapidly expanding economy and stronger private consumption helped India gain 19 places in the area of economics and growth, to rank 2. Meanwhile, improvements in worker productivity pushed the country to rank 15 in the area of labour and human capital. However, a poorer regulatory environment and a lack of investment in science and technology dragged down India’s overall ranking.
“The GDI is a very interesting way of looking at economies and throws up interesting insights. India is now ranked 34th overall out of 60 top countries and has increased its ranking by 14 which is a great achievement. India scores high on economic situation and growth (overall ranking 2) and availability of labour and human capital (15) and very poorly on financing environment (36), science & technology (41) and is lowest on business operating environment (53). Government of India’s recent efforts in ranking states should help improve India’s ranking further in the next round. The GDI is a very useful tool for Indian MNCs to identify markets and get an overview of how dynamic the countries are and where they should consider investing as they continue to globalise,” said Harish HV, Partner – India Leadership team, Grant Thornton India LLP.
Globally, Singapore offers the best business growth environment for dynamic businesses according to the GDI as a result of a strong financing and regulatory environment. Israel (rank 2) has also risen six places this year. Australia (rank 3=) drops two places but still ranks in the top five for business operating environment and labour market. Finland (rank 3=) and Sweden (rank 5) have both risen slightly, due to favourable business operating environments and an advanced technology infrastructure.
Perception vs reality
Further analysis shows that businesses are keen to emphasise the advantages of doing business in India, although they are also aware of the barriers. According to Grant Thornton’s International Business Report (IBR) survey, businesses expanding or considering expanding into India do not always recognise the benefits of operating in the country.
The strength of India’s GDI ranking for workforce and growth is recognised by many businesses. Six in ten cite low cost labour as a reason to choose the country, while 45% say the availability of skilled workers. Meanwhile, over half (57%) of firms expanding into the country consider it to be a key market.
“It is clear that the growth and human capital in India is attracting corporates from across the world into India and the world has noted that the PM has made it a personal priority to improve the business operating environment. This increased interest in India is reflected in the significant growth in India’s ranking in the GDI,” Harish HV further added.
On the other hand, international investors also recognise that the country’s business operating environment requires improvement. According to IBR, 58% of firms operating or looking to operate in the country see local legislation and regulatory requirements as a major challenge of working in India. Another area of concern is cultural barriers which are cited by 56% of firms.
Paul Raleigh, global leader - growth and advisory services, Grant Thornton said: “Market entry decisions are some of the toughest a business leader ever has to face. There are so many factors - both known and unknown - to consider. Uncertainty about what lies ahead can make it hard to make the case for action to colleagues and funding partners, and to manage risk effectively.
“The GDI can be used as a tool to help identify countries of interest by drawing on 22 indicators weighted according to the importance attached to them by real business leaders, adding that vital human perspective.”