End of Ease of Doing Business Index

Why in news?

After data irregularities and possible ethical matters involving bank staff on Doing Business were reported , World Bank said that it would discontinue the report.

What is the index about?

• Ease of doing business is an index published by the World Bank.
• It is an aggregate figure that includes different parameters which define the ease of doing business in a country.
• The study covers 11 indicator sets and 190 economies.

What is India’s rank in the report?

• India ranked low, around 130-140, till 2014.
• However, it zoomed to 63rd position in 2019-20.
• The government’s goal was to be among the top 50 economies by 2020.
• India along with other top improvers had implemented 59 regulatory reforms in 2018-19, accounting for a fifth of all reforms recorded worldwide.
• Showcasing the accomplishment, India has claimed success of ‘Make in India’ campaign that sought to raise the manufacturing sector’s share in GDP to 25% by 2022 (later revised to 2025).
• But there is a disconnect between the rise in EDB index rank and economic outcomes raising suspicion on data manipulation.
  • The annual growth rate in GDP manufacturing (at constant prices) fell to (-) 2.4% in 2019-20.
  • Net FDI inflow to GDP ratio has fluctuated around 1.5%.
  • The fixed investment to GDP ratio (at current prices) fell to 26.9% in 2019-20.

Why was the ranking so significant?

• Many countries showcase improved ranking to signal market-friendly policies to attract foreign investments.
• The Indian government weaponised the index to weaken labour regulations by dismantling official labour inspection systems and allowing employers to file self-regulation reports.

Why was the report flagged?

•  Improper data changes were made and the involvement of bank staffers is reported to be the core cause for discontinuation of the report.
• The China’s ranking was changed from 85^th to 78^th  after intervention from the bank’s top executives and their staffers.
• The parameter was altered to push Saudi Arabia’s score in the list of top improvers for 2019.
• This also impacted the UAE’s score because they followed a similar system.
• Chile’s rank on the EDB index sharply rose when the conservative government was in power and went down when the socialists were ruling despite no changes in policies and procedures.
• For Azerbaijan, involvement from World Bank staffers is believed to have resulted in the country’s score falling compared to previous years.

Source: The Hindu, The Indian Express