Has India’s rank significantly improved in the last four years on Global indices such as the Ease of Doing Business & Global Competitiveness Index?
One of the infographics on the ’48 Months’ portal‘ of the government highlights improvements India has made in its ranking in two prominent global indices on business environment. Rankings such as these are meant to give an indication of how conducive a country is for businesses, and thus how favorable it is for investment. It has to be noted that different indices may use different criteria. Improvement in these ranks is meant to indicate that over time, the country has become more favorable for investment and this should encourage foreign investors.
The Ease of Doing Business (EoDB) ranks are released by the World Bank annually and measures aspects of business regulation affecting domestic small and medium-size firms and located in the largest business city of each economy. In addition, for 11 economies a second city is covered. Even in India’s case, both Mumbai & Delhi are covered for the 2018 rankings.
The Global Competitiveness Index is a similar index released annually by the World Economic Forum that defines competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country.
This infographic claims that there has been a significant improvement in India’s rankings on both these indices during the time of the NDA government. Here is a fact check of these claims.
Global Competitiveness Index
India’s ranking in the Global Competitiveness Index for the past 10 years is the following.
Between 2014-15 and 2016-17, which is the period that the claim looks at, there has been a large scale jump in India’s rank from 71 to 39. Thus the claim made about India moving up in the Global Competitiveness Ranks is true. But it does not present the complete picture. For one, in the year 2017-2018 the rank has fallen to 40. The infographic does not consider 2017-18 ranking though it does the same for the EoDB. Also, if we look at the rankings for the entire decade, they have been around 45 to 50 making the improvement from 71 to 39 seems less significant, because 2014-15 was an odd year when the rank fell dramatically. However, it has to be acknowledged that India’s rank saw significant improvement between 2014-15 and 2016-17.
Claim Check: Though the claim that India’s ranking in the Global Competitiveness Index has significantly improved between 2014-15 and 2016-17 is TRUE, it does not consider 2017-18 ranking and also does not consider India’s ranking in the last decade.
Ease of Doing Business (EoDB)
India’s rank in the Ease of Doing Business Index (EoDB) of the World Bank for the last decade is given in the table below.
As claimed in the infographic, India’s rank improved significantly from 142 in 2015 to 100 in 2018, a jump of 42 ranks. Though there was no significant improvement in India’s rank in both 2016 & 2017, the year 2018 saw an improvement of 30 ranks. Factly had also reported earlier that India’s jump of 30 ranks is the best ever in the EoDB rankings.
Claim Check: The claim that India’s rank in the EoDB has significantly improved between 2015 & 2018 is TRUE.
Change in Methodology & controversies
It is important to note is that the criteria for these indices is not fixed. The methodology for calculating these ranks often change, and that can result in movement up and down without significant change in the business environment. For the 2018 EoDB rankings, there were significant changes to the methodology. This year in particular, there was a lot of criticism around these changes and claims that there were political motivations behind the changes. The World Bank’s Chief Economist at the time Paul Romer, was alleged to have told Wall Street Journal in an interview that the changes to methodology were targeting left leaning countries such as Chile. This created quite a storm resulting in the world bank commission an external audit on the integrity of these rankings. The external audit concluded that there was no manipulation in the rankings. The report went onto say that frequent methodology changes reduce the value of the indicators to researchers, policy makers & the media. It recommended the world bank to minimize methodology changes except to fix confirmed problems with existing methodology
Thus, although the claims made are true, they do not paint the whole picture. The starting point for calculation is conveniently a year in which the ranks were abnormally low, and there is no mention of that fact. Looking at the trend of previous years (of the previous government) along with an understanding of the methodology changes would give a better understanding of the actual change in India’s ranking over the years.