- Ease of Doing Bussiness Index
- Rankings and India
- The case of countries around globe
- Flaws in the Index
World Bank halts its Doing Business report
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The World Bank has halted its annual publication, the Doing Business’ report as it detected irregularities of data for a few countries. The bank is conducting a systematic review and assessment of data changes that occurred after the institutional data review process for the last five Doing Business reports.
Ease of Doing Business Index:
- It is an index published by the World Bank which is a benchmark study of the regulations across different Countries of the World.
- The index is a means of measuring business regulations and its implementation across 190 economies and selected cities at the subnational and regional level.
Rankings and Make in India:
- India has worked to improve its ease of doing business index ranking, as a means to attract investments to achieve targets set for Make in India (announced in 2014).
- Make in India aims at raising the manufacturing sector’s share in GDP to 25% (from 16-17% per cent) and creating 100 million additional jobs in the manufacturing sector by 2022.
- India’s ranked 63rd in the 2019 index, up from the 142nd position in 2014.
- It was seen as India’s commitment to minimum government and maximum governance.
- However, the World Bank decision to audit the Doing Business report for the last five years may implications on India.
- It has been alleged that the improvement in India’s ranking was almost entirely due to methodological changes in the ranking process.
Ground reality of the Index:
- Going beyond the data and methodology, the ease of doing business index meant nothing on the ground for India.
- While India’s ranking jumped, the share of the manufacturing sector has stagnated around 16-17% of GDP, and 3.5 million jobs were lost between 2011-12 and 2017-18.
- The annual GDP growth rate in manufacturing fell from 13.1% in 2015-16 to zero in 2019-20, as per the National Accounts Statistics.
The case of countries around globe:
- Chile’s global rank went down sharply, from 34th position in 2014 to 67th in 2017.
- The World Bank was accused of manipulating the ease of doing business index methodology, which has pointed questions to the integrity of the Index.
- Russia’s rank jumped from 120 in 2012 to 20, in six years taking Russia ahead of China, Brazil, and India.
- China attracted one of the highest capital inflows but its rank was low, between 78 and 96 for years between 2006 to 2017.
- Azerbaijan’s ranking changed from 80th to 34th, UAE from 22nd to 16th and Saudi Arabia has slipped from 49th position to 62nd in the last five years.
- The decision to suspend the publication and conduct a systematic review of the reports of the last five years is undoubtedly welcome.
Flaws in the Index:
- There are many shortcomings in the design and implementation of the index.
- The Indicators used for the index are de jure (as per the statute) and not de facto (in reality).
- There is no credible association between improvement in ranking and a rise in capital formation and output growth.
- The data for computing the index in India are obtained from larger enterprises in two cities, Mumbai and Delhi, by lawyers, accountants and brokers — not from entrepreneurs.
- The World Bank conducts a global enterprise survey collecting information from companies.
- However, there is no correlation between the rankings obtained and the enterprise surveys.
- Further, such surveys, as to meet the ease of doing business targets were to the disadvantage of workers.
- Economic history shows rich variations in performance across countries and policy regimes, which are against the simplistic generalisations in the index.
- There is no solid proof that minimally regulated markets for labour and capital produce superior outcomes in terms of output and employment.
- The Analytical and empirical foundations of the index are weak and it is time the World Bank should rethink the methodology adopted in thereport
- India must also do the ground reality check as to why the much-hyped rise in global ranking has failed miserably on the ground.