In the last 2-3 days, you might have come across some comments, especially on the social media, that the World Bank could review its latest Ease of Doing Business ranking, and India will be given a lower rank than the 100th position it was given earlier. In October last year, India for the first time had got a rank of 100 after lagging around in 130s for years.
As soon as a global endorsement of India doing better on some parameters came, some people in India were deeply hurt and attempts to discredit the rankings began. OpIndia.com had carried a piece that showed how shallow and silly some of these attempts to discredit the rankings were.
But perhaps the silliest of those attempts were the claims made by some Congress leaders, which were obliquely supported by their leader Rahul Gandhi, that the rankings were “fixed”. Basically, the Congress party insinuated that the Modi government had paid money to World Bank to manipulate data to show India in a better light.
Since such claims by the Congress party appear silly on the face value, the Congress fed ‘ecosystem’ was under pressure to come up with some ‘intellectual’ sounding reasons to back this conspiracy theory. And the ecosystem got an opportunity earlier this month.
On 12 January this year, a controversy erupted around the (Ease of) Doing Business rankings when WSJ (Wall Street Journal) published a story claiming that World Bank’s chief economist Paul Romer had said that they (World Bank) had changed the methodology of calculating the rankings in ways that were misleading and unfair, suggesting political motivation behind doing so. The controversy had surrounded one particular country – Chile.
However, 4 days later, Paul Romer clarified in his personal blog that he had neither seen any manipulation of rankings nor did he think that he had said so in the interview.
But on 20 January, “Go News”, a news website run by Pankaj Pachauri – former NDTV anchor and Communications Advisor to Manmohan Singh’s PMO – published an article titled “India’s ease of doing business just got uneasy”. The article referred to Romer’s alleged comments about political manipulation despite Romer having clarified otherwise, and worse, it dragged in India while the original controversy was about Chile.
In the said article, Go News resorted to lies and spins to insinuate that India’s improvement in Doing Business rankings was on account of dubious methodology and political manipulation. The website claimed that there will be a review of Doing Business rankings and India will be given a lower rank, in the process giving credence to earlier claims by the Congress party that the rankings were “fixed”.
But the truth is that World Bank has made it clear that the said review will be limited only to Chile. There will be no review of any other country’s performance. Interestingly, Go News contradicts itself later in the same article admitting that the review will be restricted to Chile (emphasis added) –
But in indicating a review, the bank restricted itself wholly to the Chile issue saying that “In the light the concerns expressed by World Bank Chief Economist Paul Romer in the media and our commitment to integrity and transparency, we will conduct an external review of Chile’s indicators in the Doing Business report”.
Go News didn’t stop here. It gave the entire matter further twist by trying to discredit the Doing Business rankings based on the views of a think-tank called Centre for Global Development (CGD). This think-tank has calculated its own rankings based on World Bank’s data and ranked India 147th in 2018 using their own methodology, which Go News tried to present, through their social media handles, as the “real” and “genuine” ranking.
This was further spread on the social media by some anti-Modi commentators such as a journalist named Mihir Sharma, who earlier worked with a newspaper called Business Standard (BS). A couple of days later, BS also published an article based CGD’s rankings and questioned World Bank’s credibility.
With this being a carefully crafted and well-orchestrated narrative, I feel it’s important to highlight the following points with respect to World Bank and CGD rankings –
- World Bank’s Doing Business (DB) rankings are based on a score called as “Distance to Frontier” (DTF), which captures the gap between an economy’s performance and a measure of best practice across the entire sample.
- The methodology to calculate DTF score is updated periodically and the history of these changes is available publicly on the DB website. There has been no change in the methodology for DB 2018 rankings i.e. it’s same as DB 2017. So, the comparison with 2017 score is perfectly legitimate.
- World Bank also provides DTF scores computed using past methodologies. For example, India’s DTF scores using past methodologies are presented in the below picture (source – World Bank):
So even if we consider DB2016 methodology, it’s clear that India has shown consistent improvement from DB 2015 to DB 2018 rankings, showing the highest improvement in DB 2018 rankings.
- Even if we rank the countries on DTF scores of DB 2018 calculated using the DB 2016 methodology, there will be no change in India’s ranking i.e. India is ranked 100 in DB 2018 using both the DB 2018 and DB 2016 methodologies. So a revert in methodology by the World Bank will not hurt India’s ranking.
- The think-tank CGD hasn’t provided any details about its own methodology apart from a program/script that was used to compute rankings using World Bank’s data, and hence I find it difficult to take CGD’s claims at face value (it has ranked countries like Niger, Sudan, Sierra Leone, Nigeria, Ethiopia above India!)
- In their blog post, CGD experts criticize the Doing Business rankings for having “extreme libertarian” bias. For instance, they accuse World Bank of ignoring the benefits of taxes and regulations. But they do not propose any mechanism to quantify those benefits. If World Bank can be accused of having libertarian bias, CGD can also be accused of having a socialist bias. Moreover, World Bank has clarified that Doing Business ranking is not a comprehensive measure of the business environment in a country, rather it’s a measure of the red tape and regulation relevant to the life cycle of a small to medium-sized firm.
- Even if the one is to agree with the assertion of CGD that the Ease of Doing Business rankings reward libertarian and punish socialist policies, shouldn’t the self-declared “economic right” commentators be actually happy that India has done better on this count? Or they are ready to junk their libertarian ideology because they must show Modi government in poor light?
So in essence, a misconstrued comment by a World Bank economist about Chile’s rankings were used to insinuate that Indian ranking was manipulated. To further promote this insinuation, findings by a ‘think tank’ – which also makes no comments about any manipulation to favor India – were used out of context. This was done not only by a news website run by Manmohan Singh’s former aide, but by various economists, activists, psephologists and other -ists to attack the Modi government. It shows either their desperation or lack of basic comprehension. Or maybe both.
(With inputs from Rahul Roushan)