28/10/2015 6:19 PM IST | Updated 15/07/2016 8:25 AM IST

India's 12 Point Jump In World Bank's Ease Of Biz Report Isn't Quite Correct


Since morning, officials in India's economic ministries have been ecstatic over news of India climbing 12 places in the the World Bank's Doing Business Report, an international annual score card rating the ease of doing business across 189 countries.

The Economic Times quotes Amitabh Kant, Department of Industrial Promotion and Policy: "We have reversed the trend by moving up and no country has moved 12 spots in a year. Major reforms are going to kick in from next year which will further improve our position. We are absolutely confident of being in top 50 in three years as per the target set by PM."

No less than former economic adviser to the UPA government, Kaushik Basu said:

"If the changes that we saw thus far can be kept up and strengthened a little, it is not impossible for India to be in top 100 (ranking of the ease of doing business report) by next year."

Turns out India never moved 12 spots over last year.

Also Read: India's 12 Point Jump Is Significant According To Government, World Bank

The World Bank's website clarified that India only jumped 4 places, from 134 in 2015 to 130 in 2016. A dramatic change in methodology has meant that the ranking for 2015-a dismal 142-- was updated to reflect a new measurement philosophy. Based on data available as of June 2014 that changed the 142 rank to 130. This further implies that the substantial 8-point jump last year was updated to reflect the ease of doing business of policies implemented by the government in place till June 2014: 11 months of the UPA and 1 month of the current NDA government.

For what its worth, a time-series of India's performance through the years shows that India's has languished in the 130s for a while. In the 2014 edition it scored a 134 and in 2013 was ranked 131 and it scored its biggest leap--to 132 from 120-- in 2010. Therefore in it's latest ranking, save for dramatic improvements in the ease of starting a business and businessmen accessing electricity, India is still in the zone it's been for the last 5 years.

The World Bank's Doing Business series goes back to 2003 and there are significant changes to methodology that invariably complicates a simple comparison of the ease of doing business over the decade. In fact an attempt, at the website, to map a timeline of India's performance since the report's inception only generates results from 2015 and 2016.

According to the Wall Street Journal, "..India’s big leap in the re-calculated ranking is explained by the fact that the World Bank this year added the reliability of the power supply to its measures of electricity access. Outages are far less common in New Delhi and Mumbai than in other parts of the country."

Policies implemented by the government, the World Bank said, of forcing entrepreneurs to deposit Rs 100,000 to incorporate a new company have been done away with. That move brings India in line with the 105 countries out of 189 in the Doing Business ranking that have no minimum paid-in capital requirement.

But along most of the 10 dimensions of business regulation that Doing Business considers, India’s rankings were unchanged from last year. The country slipped one place on the ease of paying taxes, to 157th in the world. On the ability to enforce contracts, India remains a dismal 178th.

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