The End Of The Doing Business Rankings

Context: The World Bank Group scrapped its flagship publication, the ‘Doing Business’ report.

About Doing Business report

• The World Bank annual publication rank countries on the Ease of Doing Business (EDB) index.
• It presents quantitative indicators on business regulations and the protection of property rights that can be compared across 190 economies.
• Ten areas of business regulation used for ranking includes starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

Significance of the index

• It helps countries measure domestic policies against global “best practices” and standards.
• As a tool to attract FDI: Many countries showcase improved ranking to signal market-friendly policies to attract foreign investments.
• Significance for India:
  • Prime Minister appreciate the target of India breaking into the top 50 ranks of the EDB index.
  • India made significant strides: From 130-140, till 2014 to 63rd position in 2019-20. Showcasing this accomplishment, India has claimed success of the ‘Make in India’ campaign.

Issues associated with EDB Index

• Ethical concerns: World Bank commissioned study cited ethical issues in preparing 2018 and 2020 editions of EDB index.
  • Favouring China: CEO of World Bank, in 2018, is accused of having exerted pressure on internal team working on EDB to falsely boost China’s rank by doctoring the underlying data.
• Data manipulation: Considering huge economic incentives, measuring regulatory functions underlying the index could be tricky, subjective and possibly politically motivated.
  • Motivated to support free-market ideal: It is dressed up under scientific garb and is underpinned by methods and data collection, which lacks standards and accountability checks.
  • Data collection limitations: For the index, management consultants and corporate lawyers collect information required for regulatory compliance, as per statute (de jure) and not as practised (de facto), from select cities and larger firms.
• Vulnerable to tweaking of methodology: India’s improved ranking was reportedly an outcome of such an effort.
  • Fine-tuning to suit political motives: Chile’s rank on EDB index sharply rose when conservative government was in power and went down when socialists were ruling.
• Mis-interpretation of the index:
  • Used to dilute labour laws: India has weaponised the mandate to improve rank in EDB index to whittle down labour laws and bring them close to free-market ideal of ‘hire and fire’.
  • Claiming success of Make in India initiative by relying on its ranking on EDB index does not hold backing of tangible evidence.

Conclusion: The World Bank’s decision to scrap its annual publication Doing Business report is welcome. The cited irregularities demand a radical course correction in making of the index.