A development that will hardly put India at ease

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 A development that will hardly put India at ease

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• World Bank halts ‘Doing Business’ (DB) publication: The World Bank has found several irregularities in data in 2018 and 2020 DB reports. a) It is conducting a review of the data changes in last five DB reports b) Its independent Internal Audit function will also audit data collection process and data integrity controls. 
• India: 

1. India needed to improve its DB ranking to attract investments and achieve the ‘Make in India’ targets announced in 2014, and it did. It jumped to 63 in 2019 from 142 in 2014. Policymakers have called the improvement a mark of success of India’s commitment to “minimum government and maximum governance”, NDA’s winning slogan in 2014.
2. ‘Make in India’ targets include improvement in manufacturing’s share of GDP from 17% to 25% by 2022 and creation of 100 million additional jobs by 2022.
3. Reality doesn’t match the rise in ranking. Manufacturing continues to be 17% of GDP and there were 3.5 million job losses between 2011-12 and 2017-18. Annual GDP growth rate in manufacturing fell from 13.1% in 2015-16 to 0% in 2019-20. India’s import dependence on China has also increased.
4. Center for Global Development’s (CGD) January 2018 report revealed that improvement in India’s ranking was due to methodical changes. 

• Chile: 

1. Chile toppled from 34 in 2014 to 67 in 2017 in the DB ranking. 
2. The fall happened during Socialist President’s rule (2014-2018). Chile’s ranking during right-wing party’s rule had improved. Chile’s President during 2014-2018 accused the World Bank of manipulating the methodology. 
3. In 2017, World Bank’s Chief Economist admitted to lack of due diligence and confidence in data integrity. He stated that business conditions in Chile had not deteriorated during 2014-2018 according to the parameters that were being measured earlier.  

• Russia: Russia went from 120 in 2012 to 20 in 2018, ahead of India, China, and Brazil but there was no significant improvement in foreign investment during this period. China’s ranking was low (between 78 and 96) despite high capital inflows. 
• Flaws in design and implementation of the ranking: 

1. Evaluation parameters examine business-friendliness of regulations, not actual implementation and process. Data is obtained from large enterprises in Mumbai and Delhi from legal experts and officials, not from entrepreneurs. World Bank’s own Independent Evaluation Group that conducts company surveys has stated that there’s a wide gap between estimated time required legally to complete regulatory requirements and actual experience reported by firms in enterprise surveys. 
2. DB rankings are based on simplistic economic generalizations like “minimal regulation and governance for labour and capital produce more output and employment”. 

• Workers’ plight: India is culpable of compromising safety standards to improve ease of doing business targets. Most states have replaced the annual mandatory inspection of steam boilers with third-party certification and mandatory self-certification by employers. No factories comply with these requirements. 
• Summary: The World Bank’s decision to assess data collection processes and data integrity controls for its ‘Doing Business’ rankings has implications for India. Since 2015 India has made efforts and succeeded in improving its global ranking. But in reality, there hasn’t been any growth in investment and output. There is no credible correlation between ranking improvement and rise in capital formation and output growth anywhere. The ranking is more a measure of a country’s regulations than actual implementation and processes that make doing business easy or difficult. India’s efforts to please rating agencies is also detrimental to worker interests and safety.

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