Recalculating ease of doing business 

Recalculating ease of doing business 

Context:

Recently, the World Bank announced that it would revise the methodology it uses to calculate the ease of doing business index.

What is the controversy?

• This move that is expected to affect the rankings of countries in the last four years.
• The index ranks countries based on how welcoming they are to businesses, as measured by criteria like the number of days it takes to start a business or obtain a licence.
• The decision to revise the methodology comes after the Bank’s chief economist Paul Romer raised concerns that the rankings could have been influenced by politics.

Why is it significant?

• The ease of doing business index has become a popular tool tracked by governments trying to show the world that they offer a favourable investment climate for private businessmen.

What are the other issues?

• It limits its sample size to just a few major cities, thus projecting an imperfect picture of overall business conditions.
• The bank is right to measure a country’s business environment based on written legal rules rather than investigating the actual ground conditions in which businesses operate.

Ease of doing business index:

• The ease of doing business index is an index created by Simeon Djankov at the World Bank Group.
• A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm.
• The World Bank included the “post-filing index” criteria for the first time in its 2017 Doing Business report under the “Paying Taxes” head.
• This restricted India’s improvement in ranking to just one place—to 130 out of 190 countries—despite a slew of reforms undertaken by the government.

India’s ranking:

• India came in at 100th place (out of 190) in the World Bank’s Ease of Doing Business Report 2018.