Indians are optimistic of business opportunities, despite poor entrepreneurial infrastructure and social inequality - There is a moderate level of innovative activity in India. The country invests 0.9% of its GDP in R&D, placing 47th, globally, and places 32nd with respect to royalty receipts earned from overseas. However, only 1.3% of goods exports come from the ICT sector, placing India a below-average 59th on this variable. Indians are extremely pessimistic about the local entrepreneurial environment: only 56%* of people believe their local area is a good place to look for a job, placing India amongst the lowest 15 countries on this Index.
This negative subjective assessment appears accurate, given that business start-up costs are extremely high at 66% of GNI per capita. In addition, India has a weak infrastructure for entrepreneurship: less than a third of the population owns a mobile telephone, internet bandwidth capacity is only moderate, and the availability of secure internet servers is low. Social and economic opportunities are extremely unequal across different socio-economic groups in India. However, nine out of 10 people believe that hard work allows people to get ahead, suggesting at least the perception of a meritocratic society.
India Slips Below China on Global Prosperity Rankings
Despite strong rankings for governance and economy, India is dragged down by poor performance in health, social capital and entrepreneurship. India ranks 88th in the world while China ranks 58th.
According to the newly published 2010 Legatum Prosperity Index, India fell by ten places in the rankings, down to 88th since last year, primarily due to a drop in personal freedom coupled with poor rankings on measures of health and entrepreneurship. The Prosperity Index presents a comprehensive view of prosperity that includes both economic factors and quality of life factors. These are captured in eight sub-indexes, which range from Personal Freedom, Health, and Education to Governance and the Economy. Covering 110 countries (over 90% of the world’s population), the Prosperity Index stands out in reinforcing the idea that material wealth alone does not make for a happy society.
Happy citizens are produced as much by democracy, freedom, social cohesion and entrepreneurial opportunity as they are by a growing economy. The two measures on which India ranks highest are the Economy (44th) and Governance (41st). Both scores are high partly due to of high levels of public optimism: three-quarters of Indian citizens approve of the government, which is the 16th highest rate globally, and 87%* express confidence in India’s financial institutions, placing the country fifth in the world on this measure.
The Prosperity Index finds that India is a relatively successful democracy with a high level of stability. Whereas, China is among the 10 least democratic countries in the Index, but has a relatively efficient government. However, these do not mitigate India’s poor performance on the measures of Education (for which it ranks 89th in the Index), Health (95th), Entrepreneurship and Opportunity (93rd), and Social Capital (105th). The prosperity Index finds that India has extremely poor healthcare, failing to prevent systemic diseases or malnourishment, it has a weak entrepreneurial infrastructure, a poorly developed education system, and extremely low levels of social capital.
China now ranks 30 places higher than India in the overall global rankings and outperforms India on the Economy sub-index, where China ranks 24th while India trails in 44th position; and in the Social Capital sub-index where China ranks 27th while India places only five spots from the bottom of the Index at 105th. There are marked differences between the two countries’ performances on a number of key variables: 57% of the Chinese population believe they can trust others, the fifth highest value in the Index, while in India this value is only 21%. In China, the unemployment rate is low at just 4%, while unemployment in India is relatively high at 7.2%. Dr. Ashley Lenihan, Senior Fellow at the Legatum Institute said, “India has strong foundations in its economy as well as in its governance structure. However, there are areas for improvement: India does not perform well on measurements of entrepreneurship, education, and health. Long-term prosperity will come from making significant improvements in those areas.” “The Prosperity Index,” continued Dr Lenihan, “reveals the foundations for prosperity that indicate how well a country is doing in creating a healthy, happy, and prosperous society.