Developing a competitiveness index at sub-national level for India: an economic growth measure
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 11 January 2022
Issue publication date: 21 November 2023
Abstract
Purpose
The objective of this study is threefold–first, to develop a Regional Competitiveness Index (RCI) for measuring competitiveness of sub-national regions for India; second, to test this index for its ability to explain regional growth, which validates usage and applicability of this index; and third, to further investigate if the competitiveness of states is in turn caused by economic growth, i.e. it is tested if there is a bidirectional causality between competitiveness and regional growth.
Design/methodology/approach
The data of indicators used in the index are from sources available freely in public domain. The competitiveness index is constructed using equal weightage supported by principal component analysis (PCA) technique. The causal relationship analysis is done using panel data of 10 years from 2008 to 2017 for 32 Indian states/union territories. The generalized method of moments (GMMs) is used for this dynamic regression estimation.
Findings
Based on RCI score, states have been ranked and through rank analysis, the authors observe the performance status of these sub-national regions and are able to categorize them as improving, no change or deteriorating in regional competitiveness. Using the GMM estimation, the association between RCI and economic growth is found to be significant at 10% level. This shows that regional competitiveness as captured through the RCI score is able to explain regional economic growth and economic disparity among the sub-national units. Further, that RCI score is found to Granger-cause growth, while growth does not lead to better RCI scores. This establishes the usefulness of RCI as an important policy variable to compare states and provide direction for sectoral reforms.
Research limitations/implications
The limitations of the study include (1) broad assumption that these sub-national regions belong to a uniform macro-economic and technology environment, and (2) data constraints as it is a longitudinal study. The study implies that the composite index could capture differences in regional competitiveness explaining regional economic disparity and that competitiveness causes higher economic growth and not vice versa.
Practical implications
The RCI score can prove to be a useful indicator of economic performance of different states and can be used by national and state policymakers to compare and assess regional disparity among different states. The pillar-wise scores will be useful for in-depth study of weakness and strength of the sub-national territories.
Originality/value
Construction of an RCI for sub-national territories and analysis of panel data for longitudinal study of ten years is unique in the regional competitiveness literature.
Keywords
Acknowledgements
The authors would like to thank the editor and the anonymous reviewers for their insightful comments and suggestions for improving the paper.
Funding: This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Declaration of competing interest: The authors declare that they do not have any known competing interest financial or personal relationships that could have appeared to influence the work reported in this paper.
Data availability: The data that support the findings of this study are from freely available public domains including reports and websites. Data can also be made available upon request to the authors.
Citation
Moirangthem, N.S. and Nag, B. (2023), "Developing a competitiveness index at sub-national level for India: an economic growth measure", International Journal of Emerging Markets, Vol. 18 No. 10, pp. 4481-4503. https://doi.org/10.1108/IJOEM-02-2021-0209
Publisher
:Emerald Publishing Limited
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