India improved its ranking by six spots in the latest Business Environment Rankings (BER) globally, according to data released by the Economist Intelligence Unit (EIU) on Thursday.
The upward shift is due to its improved score in parameters like technological readiness, political environment, and foreign investment among others.
The BER measures the attractiveness of the business environment in 82 countries on a quarterly basis across 91 indicators.
The rankings for the second quarter of 2023 show that Singapore, Canada, and Denmark will be the three countries with the best business environment over the next five years.
Though India has historically struggled to attract manufacturing investment, policy reforms are making it easier to do business in India, the report said. “A strong, stable economy and access to a large labour supply form the basis of its appeal to investors. Policy reforms are making it easier to do business in India, and we expect major improvements in areas such as infrastructure, taxation, and trade regulation, boosting investment,” it noted.
The report states that although south-east Asian economies have been the principal beneficiaries of the supply-chain diversification, in the long term, it is India that offers a potential scale comparable to that of China due to its huge domestic market.
“Alongside intrinsic capabilities, including solid economic fundamentals, sound digital infrastructure, and favourable demographics, improvements in the country’s business environment are reducing the risks that have previously acted to hold back major manufacturing investment,” it noted.
Of the 17 economies in the Asian region, India is ranked 10th in the 2023- 27 forecast period, up from 14th in 2018-22 period.
The report forecasts India’s working-age population to expand by almost 100 million in the period to 2030, pushing it comfortably past 1 billion, while that of China will fall by 40 million to under 950 million. However, despite the ample supply, huge labour regulation and skilling remains a constraint. As a result, India’s regional BER in labour markets improved to 13th in 2023-27 from 16th in 2018-22.
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India’s regional BER ranking for infrastructure improved to 10th in 2023-27 from 14th in 2018-22 through a host of government initiatives to boost infrastructure in the country. India scores in the top 10 in technological readiness because of a more conducive environment for e-commerce and enhancement of information technology-ready government services.
“E-commerce has become the focal point of India’s digital revolution, owing to factors such as a growing middle class, the availability of relatively cheap mobile connections and skilled labour to develop indigenous technology platforms,” the report noted.
The report notes that due to deterioration in business environment in China as a result of greater policy uncertainty, tensions with the United States and reorientation of supply chains by firms, its ranking fell by 11 spots globally in the second-quarter compared with a year earlier, whereas Asian countries like Vietnam emerged as the biggest gainer as it improved its position by 12 spots globally, followed by Thailand and Belgium.