India Pro Competitive Reforms Ranking Climbs To 57th

India Pro Competitive Reforms Ranking Climbs To 57th

Why in News?

Recently, India Pro Competitive Reforms Ranking climbed 25 spots to rank 57th globally on Competere Foundation report’s Market Distortions Performance Index.

Highlights of the Competere Foundation Report

• Title: The report titled “India’s Next Growth Frontier: Reducing Anti-Competitive Market Distortions to Build on India’s 2010–2023 Reform Progress” was published by the Competere Foundation.
  • The report was released in collaboration with the Centre for Trade and Investment Law (CTIL), IIFT. 
• ACMDs: The report is based on ACMDs. It is defined as government-imposed or government-tolerated policies that weaken normal market competition by interfering with voluntary exchange.
  • These distortions include tariffs, restrictive regulations, licensing requirements, subsidies, ownership restrictions, selective enforcement, weak property-rights protection, and policies protecting incumbent firms. 
  • Rather than encouraging open competition, such measures reduce efficiency, discourage investment, increase business costs, and limit innovation.
• Measurable Pillars: The foundation evaluates countries through three Anti-Competitive Market Distortions (ACMDs) pillars.
  • Property Rights Protection (PR) measures legal certainty and protection of private property. 
  • Domestic Competition (DC) evaluates how easily firms can enter, operate, compete, and reorganize within the domestic market. 
  • International Competition (IC) measures openness to trade and global competition. 
• Ranking Improvement: The report highlights that India improved from 82nd position in 2010 to 57th in 2023, gaining 25 places in the global Anti-Competitive Market Distortions (ACMDs) ranking.
  • During the same period, India’s estimated five-year GDP per capita loss caused by market distortions declined by 11 percentage points. 
  • The report estimates these reforms generate roughly 1% additional GDP per capita growth every year over the long run. 
  • India’s strongest improvement occurred in creating a more competitive domestic business environment through better regulations, smoother business operations, investment facilitation, and stronger competition.
• Domestic Reforms: The report attributes India’s ranking improvement to several major reforms:
  • The implementation of the Goods and Services Tax (GST) reduced internal tax fragmentation and created a more integrated national market. 
  • The Insolvency and Bankruptcy Code (IBC) strengthened insolvency resolution and improved asset reallocation. 
  • India also improved significantly in the World Bank Doing Business rankings, rising from 142nd in Doing Business 2015 to 63rd in Doing Business 2020. 
  • India’s largest progress occurred under the Domestic Competition pillar, indicating that internal reforms have contributed more significantly than external trade liberalisation during the review period.
• Trade Facilitation Measures: The report highlights important trade facilitation initiatives recognised by the WTO Secretariat. These include:
  • The Indian Customs Electronic Gateway (ICEGATE), 
  • Single Window Interface for Facilitating Trade (SWIFT), 
  • Authorised Economic Operator (AEO) Programme, 
  • Direct Port Delivery (DPD), Direct Port Entry (DPE), and 
  • Expanded use of the Risk Management System (RMS). 
  • These reforms reduced customs delays, simplified administrative procedures, improved logistics efficiency, and strengthened India’s ability to participate in international trade.
• Challenges: The report identifies important remaining constraints:
  • The report states that Indian exporters increasingly face European Union (EU) regulatory barriers, particularly Sanitary and Phytosanitary (SPS) measures, Technical Barriers to Trade (TBT), pesticide residue limits, conformity assessment procedures, and sustainability regulations. These measures can restrict market access beyond legitimate public policy objectives.
    • It also cautions that wider adoption of EU standards could reduce the benefits expected from the India–UK Free Trade Agreement.
  • India continues to impose sector-specific Foreign Direct Investment (FDI) caps, government approval routes, sourcing mandates, ownership restrictions, security screening, and business-model limitations.
    • According to the report, these restrictions reduce investment, market entry, competition, productivity, and consumer welfare.
  • The report identifies retail and e-commerce as the clearest example of remaining market-access constraints.
    • It notes restrictions on inventory-based e-commerce models, conditions on marketplace entities, and the 51% FDI cap in multi-brand retail, limiting integrated supply chains and efficiency.
  • Several sectors continue to face conditional market access, including media, news, civil aviation, banking, financial-market infrastructure, defence, and space.
    • The report argues that ownership restrictions should be reviewed where public objectives can be achieved through regulation instead.
  • The report expresses concern that India’s digital competition policy may shift from effects-based enforcement to precautionary (ex-ante) regulation.
    • It highlights issues related to the Digital Competition Bill, CCI actions, and global-turnover-based penalties.
  • Competere Foundation estimates that remaining distortions impose an economic cost of approximately US$173.6 billion over five years (about 4.2% of GDP), comprising US$127.2 billion from FDI restrictions and US$46.4 billion from competition-policy drift.
• Recommendations: India should continue challenging unnecessary or disproportionate foreign regulatory barriers, especially SPS and technical regulations that function as disguised trade restrictions.
  • The report recommends resisting the spread of dynamic regulatory alignment models, particularly those extending highly restrictive regulatory systems into additional markets, thereby preserving regulatory diversity for exporters.
  • India should reassess FDI caps, government approval routes, sourcing mandates, ownership ceilings, and business-model restrictions based on their impact on investment, competition, productivity, consumer welfare, and market entry.
  • The report recommends evaluating retail and e-commerce restrictions in terms of logistics efficiency, supplier access, technology diffusion, consumer prices, and opportunities for small businesses.
  • Competition enforcement should remain based on consumer harm, competitive effects, proportional remedies, due process, and dynamic efficiency, rather than targeting firm size or market position alone.
  • The report recommends regularly using the Anti-Competitive Market Distortions (ACMD) framework to monitor reform progress.
    • Recommended to identify remaining distortions across Property Rights, Domestic Competition, and International Competition, and prioritise reforms with the highest potential GDP per capita gains.

Frequently Asked Questions (FAQs):

1. Which global report ranked India 57th in pro-competitive reforms?
The Competere Foundation’s “India’s Next Growth Frontier” report ranked India 57th in pro-competitive reforms.

2. What are pro-competitive reforms?
Pro-competitive reforms reduce market distortions, encourage fair competition, improve efficiency, attract investment, and promote sustainable economic growth.

3. Why did India’s ranking improve from 82nd to 57th?
India improved through GST, IBC, business reforms, trade facilitation, and stronger domestic competition between 2010 and 2023.

4. Which sectors contributed to India’s improved ranking?
Taxation, insolvency, trade facilitation, customs administration, and the overall domestic business environment significantly improved India’s ranking.

5. How do pro-competitive reforms benefit the economy?
They increase investment, productivity, innovation, employment, consumer welfare, and long-term GDP per capita growth while reducing market distortions.

Disclaimer: Information in this article is based on official announcements and public records. Regulations and implementation details may evolve over time.