The World Bank will shortly release the 2018 edition of its annual Ease of Doing Business rankings.
There have been regular complaints filed by countries unhappy with their place on the rankings in the earlier reports.
Given this scenario, it is important for India to remain cautious of the assessments outcomes.
What are the drawbacks of the report?
The WB's Doing Business rankings do not measure all aspects of the business environment and seem to be narrow in many respects.
Criteria - They primarily focus on the hurdles across certain areas of business regulation such as red tape and other administrative impediments.
This is not truly representative of the issues and difficulties that firms and investors experience in the real business environment.
The wide prevalence of informal economy and poor enforcement of regulations are some of the causes for this narrow assessment.
Coverage - The World Bank has traditionally assessed just the largest business city in each country.
It incorporates the second major city as well for the 11 most populous economies as of the 2015 report.
The recognition and reflection of the reforms only in a few cities is not representative of the improvements in the investment climate of a country as a whole.
This drawback particularly has a multiplier effect for large countries such as India; the assessed cities in India are Mumbai and Delhi.
However, this is proposed to be addressed in future; e.g. India would see the inclusion of eight additional cities.
Firm-level surveys - Theseareundertaken since the 1990s as an alternative to address the assessment inadequacy in the standard methodology.
Considerably, there are huge gaps in the assessment methodologies of the two.
There are differences in the data concluded through Doing Business indicators and the enterprise surveys.
What caution should India take?
India's poor 130th rank in the last year's report has captured widespread attention.
It suggests a relatively poor business environment than the BRICS (Brazil, Russia, India, China and South Africa) economies.
It is anticipated that India’s rating will improve in this year's report as an effect of various recent reforms.
Whatever the outcome this year be, given the limitations in the assessments, the rankings cannot be taken as a comprehensive picture of the investment climate.
Thus, there is need for a cautious response to the report and the rankings by policy makers and investors.
Quick Facts
Ease of Doing Business Report
The ease of doing business index is an index created by the World Bank Group.
It attempts to quantitatively capture the regulation that small- and medium-sized firms encounter in around 190 countries.
Established in 2002, this index has become the single most influential measure of a country’s investment climate.
Firm-level enterprise surveys
Undertaken since the 1990s, an enterprise survey is a firm-level survey of a representative sample of an economy's private sector.
Firm-level surveys are conducted by private contractors on behalf of the World Bank.
The surveys cover a broad range of business environment topics such as access to finance, corruption, infrastructure, crime, competition, and performance measures.
