Assessing Ease of Doing Business Ranking

What is the issue?

World Bank’s chief economist recently claimed that the bank’s flagship “Ease of Doing Business” ranking might have been unfairly manipulated.

What is the Ease of Doing Business ranking?

• ‘Ease of Doing Business’ ranking is a rank list published by the World Bank.
• It rates various countries on the basis of their pro-business policies.
• The rankings maps regulations in a country on parameters such as the ease of “starting a business, enforcing contracts and securing construction permits”.

What are the shortfalls?

• Introduced in 2003, the report is premised only on the legal setup.
• It falls short of reflecting the practical aspects of how things move on the ground.
• Moreover, the methodology has not remained the same and now doubts have been expressed from within the bank.
• Notably, the question raised is not about the technicality of continuously changing methodology but about the very integrity behind it. 
• Besides, over the years, several national governments have made making good ranks a top priority.
• The governments, at times, are merely tailoring their policies to secure a better rank based on WB’s parameters.
• Genuinely framed pro-business policy frameworks are thus not happening.

What is Chile’s case? 

• The immediate case in point was Chile, which saw its ranking sway massively over the years, from 25 (2006) to 49 (2010) to 34 (2014) to 55 (2017).
• The apprehension that Chile’s rankings were manipulated based on 'which political faction ruled the country', has taken root.
• Researchers from the “Centre for Global Development (CGDev)” have shown how changes in the methodology were employed to obtain such rankings.  
• It is possible that certain regimes make it easier to do business than others.
• However, repeated revision in methodology clearly seems to have nudged results to attain desired rankings.

What is the case with India?

• Analysing the trend of rankings bring out huge illogical variations in rankings of many countries.
• Notably, India’s rank has risen from 142 to 100 between 2014 and 2018.
• Even though the World Bank has clarified that it stands by India’s ranking, questions on the authenticity of the country's achievements continue.
• Significantly, India’s ranking was already under criticism, as the WB ranking had limited its assessment to only the cities of Delhi and Mumbai.
• World Bank has to address the shortfalls and integrity questions, to restore its credibility.

Source: Business Standard