Why in news?

• The World Bank Group based in Washington DC, stated on September 16, 2021 that the publication of Ease of Doing Business (EoDB) ranking is being halted.

What is the EoDB Ranking

• The ranking outlines the level of regulation in 190 economics
• It compares the 12 parameters, needed to starting, sustaining and winding down a business
• Parameters are Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading across borders, Enforcing Contracts and Resolving Insolvency
• The “Enforcing Contracts indicator” is essential to the success of the Doing Business report.
• Time, cost & quality of Judicial Process are the three variables which the World Bank has taken into account for ranking the countries.

Importance of the report

• Nations around the world monitor this index
• This index shows the ranking of nations from most business-friendly to worst
• This report is very competitive and dynamic
• The developing countries like India, China, South Africa, Indonesia, Brazil and Nigeria has put special focus on the index in seeking more foreign direct investment

The wrong doing

• Former World Bank President Jim Yong Kim and ex-CEO Kristalina Georgieva, instructed the Doing Business team to re-evaluate China’s data to keep its rank at 78
• Internal audits had been activated in June 2020 with allegations of data manipulation
• Concerns were raised about China’s undue influence at World Bank.

Why in such a bad shape

• In January 2018, Paul Romer, the World Bank’s chief economist announced that the ranking of last four years will be corrected and recalculated .
• Chile was unfairly penalised during the administration of President Michelle Bachelet.
• After the findings of past reviews and audits, the management of World Bank has decided to discontinue the Doing Business report.

Government’s Stand

• Centre has not officially commented on the matter.
• Some officials fear this will discredit India’s overall ease of doing business endeavour
• Officials believe it will help exposing China’s non-ethical practices
• India hopes, more business will shift their supply chains from China to India.

Reliability of the ranking

• Even before this controversy, it was openly know that there are several gaps
• The data takes into account just the cities like Delhi and Mumbai from India; Beijing and Shanghai from China.
• Once out of these cities, the ‘Ease of doing business’would vary remarkably. These loop-holes were exploited in China’s ranking.

Improving the methodology

• An external panel of World Bank suggested
• More data collection from representative samples of ‘actual’ business owners
• Give importance to the government functions to provide essential public goods like transport, communication, skill workforce, law and order etc
• Improve the transparency and oversight of doing business
• Make the ‘Contracting with government’ indicator more relevant
• Restore and improve the ‘Employing Workers’ indicator but do not rank countries
• Eliminate the indicators ‘Protecting Minority Shareholders’ and ‘Resolving Insolvency’
• Tax rates of countries should not be an indicator.

Importance of EoDB for India

• India’s position jump from a low of 142 in 2014 to 63rd in 2019 an unparalleled feat
• India targeted to be in the top 50 club as soon as possible
• A wide range of reforms were initiated by government to improve the conditions of doing business across local, state and national levels
• Government marketed the ranking extensively before domestic and foreign audience