[Answered] Critically evaluate the effectiveness of focusing on improving a country’s Doing Business scores as a strategy for economic growth.

The Ease of doing business Index was an index published by World Bank. It was introduced in 2003 and includes different parameters that define the ease of doing business in a country. The latest report, published in October 2019, placed India at 63^rd in Doing Business, compared with 77^th in 2018 and 100 in 2017. Following an inquiry that revealed “data irregularities” in its 2018 and 2020 editions, as well as potential “ethical matters” involving bank staff, the World Bank, decided to stop publishing this report.

What were the inherent flaws in the EODB report?

• Actual Implementation: World Bank was complacent in overseeing the timely implementation of projects and took the word of the government as final. This could be seen in the implementation of the GST and Insolvency & Bankruptcy Code.
• Small sample size: India’s ranking was based on parameters collected from only 2 cities Mumbai and Delhi. No 2 cities can be representative of such a diverse country as India.
• Data Irregularities: World Bank found data irregularities made in the case of four countries — China, Azerbaijan, Saudi Arabia, and the UAE. This severely impacted the credibility of the report.
• Neglect of agriculture and manufacturing: Since there are fewer regulations in the service sector, it made doing business in metro cities is easier as compared to other cities. This did not give the full picture of the economy as India has a large population dependent on agriculture.
• Unrealistic Assumptions: World Bank used standard metrics to assume that all businesses are subject to similar tax treatment. This does not take into account surcharges, cess, and additional levies on “sin goods” or tax exemptions for doing business in North East and SEZs.
• Labour Laws: EODB does not include labour regulations as a parameter. If these were included India would have a low ranking because of highly restrictive labour laws.

Way Forward:

A revised framework should consider both costs to the business of regulatory policies alongside socio-environmental benefits. Hence, it would be appropriate to develop Sustainable Business Policy Index which would be consistent with SDG. Another option is using the Index of Economic Freedom published by the Heritage Foundation as a metric to get a more accurate picture of the economy.