Ease of being gamed: World Bank’s Index was flawed, halting Doing Business report is a good idea

By: |
August 31, 2020 4:40 AM

India is not mentioned as a country where data has been manipulated, but several observers, including this newspaper, have argued that the rankings were easily gamed.

The World Bank decided to suspend the report till it evaluated the criticism of it and came up with a satisfactory fix.

The World Bank’s Doing Business Index was well-intentioned, to allow investors to be able to rank countries based on how easy it was to do business, but deciding what went into this was always tricky; ensuring no bias crept in the measures, it appears, was even more tricky and that is why, last week, the Bank decided to suspend the report till it evaluated the criticism of it and came up with a satisfactory fix. In the case of Chile, as The Wall Street Journal (WSJ) had pointed out when the controversy first broke out, the country’s ranking deteriorated under a socialist government and improved under a conservative. In 2015, Chile was 33rd in ‘ease of paying taxes’, but, in 2016, after the Bank added a new parameter in this, Chile’s rank fell to 120th. While the Bank apologised to Chile, it said the issue of political bias raised by its chief economist Paul Romer was incorrect; a few weeks after this, Romer quit.

This time around, a WSJ story quotes an anonymous source as saying, the issue revolved around data for four countries—China, Azerbaijan, the UAE and Saudi Arabia—allegedly being manipulated. China has climbed from being 90th five years ago to 31st, Azerbaijan from 80th to 34th, UAE from 22nd to 16th and Saudi Arabia has slipped from 49th position to 62nd in the last five years.

India is not mentioned as a country where data has been manipulated, but several observers, including this newspaper, have argued that the rankings were easily gamed. In the electricity sub-index, for instance, rather than the cost of electricity—which is very high relative to competitor countries—the index emphasised how long it took to get an electricity connection. While no one has come across anyone who either started—or shelved—a business due to how long it took to get a new electricity connection, it didn’t help that the Bank measured this only in Delhi and Mumbai, two cities where, as it happens, private suppliers provide electricity. Indeed, while digitisation of certain processes has meant it takes less time to start a business in India now, most agree the nightmare really starts after that.

In fact, an index that tries to measure time taken for certain procedures, necessarily leaves out some of the more relevant parameters like policy uncertainty, even hostility if you look at instances like the retrospective tax.While India’s rapid rise in the Index served as good publicity, given this was accompanied by greater policy uncertainty in critical areas, it appeared the government was being lulled into a false sense of complacency. To that extent, the suspension of the Index is good news as the government can then get back to working on delivering what really matters instead of chasing ranks on an index that was always a faulty one.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1CAG on defence offsets: A case of the bureaucracy failing to bite the bullet?
2Neobanks: India must consider the introduction of digital-only bank licences
3India must consider making Covid-19 vaccine free: It will be disastrous if people opted-out due to cost