Higher you go, more difficult it is to improve: World Bank’s Croci on India eyeing top 50 for Doing Business
The World Bank’s Doing Business 2020 study, released by the World Bank last week, showed that India improved 14 places from 77 to 63 out of 190 countries in the Ease of Doing Business (EODB) rankings. Bank economist, Santiago Croci, who led the data collection and analysis for the study, discusses linkages between the indicators and macro economy, what it till take to get India into the top 50 and so forth with Sriram Lakshman. Edited excerpts follow:
On the link between the overall economic situation in India and the doing business indicators
Doing Business, what they’ve measured is regulations that are more at micro level and not at the macro level. So, there are little things that can impact the business environment of a country that are not covered by Doing Business. So, things such as security, the level of education of workers in a given country, infrastructure, broadly speaking, is not covered by doing business. What we measure is business regulations that affect local, small companies. Also, the process of reform that the government undertakes, takes years. In the case of India, we’ve been working… or they have been engaged in Doing Business indicators for a few years now and you see the results of those efforts down the line. And during that time you can see economic impact due to many factors that are not directly related to doing business measurements.
For eleven economies, data are collected from the largest and second largest business cities (Mumbai and Delhi in India’s case). The EODB score is arrived at by taking a population-weighted average of the scores for each city.
On reports that Kolkata and Bengaluru are going to be counted in the scoring from next year and the decision process. Also, on whether using the largest cities is non-representative of the countries …
There are no final decisions on this. We are in discussions with the senior management of the Bank and the Government of India to see if at some point we could include additional cities. We would inform our stakeholders in advance and there will be some sort of collaboration with the countries that … would be affected by this change,if it happens.
So, doing business does focus on the largest business cities. Now with regards to your second point of whether or not it’s a limitation or is not representative so here, I think we need to be very careful because as a matter of fact, it is not true that because they’re a larger city, business is easier. It really depends on each country and many different factors.
There’s a big chunk of the data that is based on legislation that is applicable at national level. So for instance, if you look at the bankruptcy laws, the secure transactions legal framework, Companies Act, all of these are, generally, in most countries, the same across regions.
So there’s a big chunk of the data that will not vary regardless of which city we take into account. Second, there are aspects of doing business here that do change from one city to another. And these are more of… if you take a look at procedural… procedures such as constructing permits, starting a business, getting electricity, [ for] those we see more variation. But again, it’s not because you are in the largest city that the process is going to be easier.
So, yes, it’s a limitation, but going so far as to say it’s not representative… I think it’s a bit too much.
Prime Minister Narendra Modi had set a target for India to make it into the top 50 list by 2020. Improvements, higher up, in any rankings are typically harder. On what it will take for India to make a jump into the Top 50…
So yes, you’re right. The higher you go, the more difficult it is to improve. The dual areas that I see where India could do the most progress are maybe some of the most difficult ones to reform. India’s score in the Doing Business 2020 ‘enforcing contracts’ indicator is one of the country’s lowest scores. That’s an indicator that looks at commercial disputes and the efficiency of courts. And this is something that if you look at the data, you can see that, for example, in Mumbai it takes three times longer than in other cities of high income economies to solve commercial disputes through courts. So this requires judicial reform and it’s something that is difficult to achieve. If courts’ processes were made more efficient and if courts were modernized, India could score better on this indicator.
Another area that I think would be interesting and that would be a focus to look into would be the land administration system, the registered property indicator, where India also ranks pretty low and where there is a lot of room for improvement. We have a quality of the land administration index that scored 30 points, India. Mumbai in this case scores 14 out of 30 so that means there are a lot of things that can be improved. Delhi’s score is even lower [ 8 out of 30].
On how India is expected to fare when ‘contracting with the government’ – which measures the efficiency of the public procurement system – is incorporated into the EODB indicator next year.
It’s too early to tell, to be honest with you, because we are still refining the methodology of that indicator. It’s an indicator that is going to look at, as you said, the procurement cycle and process involved with a road resurfacing. It will look at the time and efficiency of the process. It will also assess the compliance of regulation with internationally recognized good practice, in terms of transparency, for instance.
India is an important client of the World Bank and has bought in to the Ease of Doing Business indicator, such as by setting targets for its ranking. On potential conflicts of interest that could arise because of the relationship.
Well, actually there are, worldwide… around 70 countries that have reform committees aimed at improving and Doing Business indicators and the number of people growing every year. So, I know that India and China are big factors and they get a lot of attention but they’re not the only countries that set up these type of targets. Many have done for many years. In our case, I mean the particular work of the Doing Business unit team, it doesn’t matter for us. It doesn’t influence us in any way, shape or form. We are not involved in the reform process. We are the measurement. We just measure what countries do. So in that sense, in my experience, it hasn’t been an issue for us in any way, shape or form.