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Source: The post is based on the article “World Governance Index: Need for World Bank’s governance indicators to be transparent” published in “Indian Express” on 16th November 2023
Why in the News?
Chief Economic Advisor has raised concerns over the use of Worldwide Governance Index Indicators in ratings assessment by credit ratings agencies. He has called for the World Governance Index to be more transparent and less subjective.
What is the World Governance Index?
| Specifications | Details |
| Published by | World Bank |
| Purpose | It provides a ranking of 215 countries territories based on six dimensions of governance: 1)Voice and Accountability 2)Political Stability and Absence of Violence 3)Government Effectiveness 4)Regulatory Quality 5)Rule of Law 6)Control of Corruption |
| Sources | WGI aggregates information from over 30 data sources provided by various institutions like survey institutes, think tanks, NGOs, international organizations, and private sector firms. Examples include the Economist Intelligence Unit (EIU), Varieties of Democracy (V-Dem) Project and Freedom House. |
| Significance | WGI plays a key role in deciding the sovereign credit rating of any country. |
What are the concerns of India related to the World Governance Index?
1) The World Bank compiles the World Governance Index Indicators using data from think tanks and organizations like Economist Intelligence Unit (EIU), Varieties of Democracy (V-Dem) Project and Freedom House. However, India has argued that these indicators have methodological problems as they are based on subjective opinions of some experts who do not have presence on the ground. For instance, US-based Freedom House has given India a score of 66 out of 100 and tagged it ‘partly free’. EIU 2022 Democracy Index ranked India at 46 and classed it as a ‘flawed democracy’.
2) These indicators are then used by global rating agencies to assess governance levels while deciding on countries’ credit ratings. A lower credit rating increases the borrowing cost for countries. Hence, that’s why India has called for the World Governance Index to be more transparent and less subjective.
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