Banking

As World Bank Reviews Ease Of Doing Business Rankings, Will India Be Affected?

The World Bank’s chief economist has said he will recalculate national rankings of business competitiveness going back at least four years.

Paul Romer. Credit: Reuters

New Delhi: India’s position in the World Bank’s annual ‘ease of doing business’ index could be affected as the Washington-based institution moves to recalculate its rankings of the last four years amid suspicion that their sanctity might have been compromised due to the reported use of politicised methodology.

The World Bank’s chief economist, Paul Romer, on Friday told The Wall Street Journal that the bank would be recalculating national rankings of business competitiveness in the report called ‘Doing Business’ going back at least four years.

India broke into the top 100 in the World Bank’s latest ‘ease of doing business’ rankings, notching up the biggest improvement among all countries on the back of big gains on a number of measures. The rise to the 100th position from 130th the previous year made India one of the top 10 best-improved countries, which the Modi government celebrated as an emphatic endorsement of its economic reforms.

The bank’s index ranks nations on parameters like the number of days it takes to open a business, or the cost of getting construction permits. Countries that make their business environment worse, for instance by drawing out the permitting process, get penalised in the rankings. The World Bank first published this report in 2002.

After coming to power in May 2014, the Modi government had set a target of breaking into the top 50 from 142 that year.

World Bank. Credit: Reuters

Buoyed by the impressive gains scored by India on the ease of doing business index for 2018, finance minister Arun Jaitley said in a press conference, “I think it is possible to take India to the first 50 ranks as envisioned by Prime Minister Narendra Modi”. In comparison, India improved its position by a mere four places, from 134 to 130, in the World Bank’s 2016 rankings.

Not all that glitters is gold

According to Romer, the World Bank repeatedly changed the methodology of one of its flagship economic reports over several years in ways it now says were unfair and misleading.

Over the last four years, the World Bank added new components dealing with construction permits, new measures of electricity reliability and tariffs, new measures of the quality of judicial processes for shareholders and a new measure of tax filing, among others.

Over time, the World Bank staff put a heavy thumb on the scales of its report by repeatedly changing the methodology that was used to calculate the country rankings, Romer said.

The eight indicators on which reforms were implemented in Delhi and Mumbai – the two cities covered by the latest report – are: starting a business, dealing with construction permits, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

In the 2018 report, India performed well in the areas of protecting minority investors, getting credit, and getting electricity. The previous report recognised India for reforms in the areas of getting electricity, paying taxes, trading across borders and enforcing contracts.