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India, World Bank, And Doing Business Index Controversy

Kristalina Georgieva, the current Managing Director (MD) of the International Monetary Fund (IMF), has come under fire for her role in these irregularities, at the time when she was at the World Bank.

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The World Bank, in the month of September, said that it has discontinued its Doing Business Report and Ease of Doing Business Index (EBDI), after 18 years, after allegations of data rigging, influenced by political influence. 

Kristalina Georgieva, the current Managing Director (MD) of the International Monetary Fund (IMF), has come under fire for her role in these irregularities, at the time when she was at the World Bank. 

Meanwhile, Georgieva denied all the allegations and disagreed with the findings, compiled by an outside law firm (US-based WilmerHale) at the World Bank’s direction to start an investigation against its president, Jim Yong Kim, and Georgieva for pressuring employees to boost China’s ranking in its 2018 Doing Business report. 

Former World Bank Chief Economist Paul Romer resigned from his role in January 2018, stating that methodological modifications in generating the report resulted in a drop in socialist Chile's ranking. Romer intended to recalculate the ranks by reviewing the previous four years' reports.

Ease of Doing Business and India: 

There was a time when India was ranked 116 out of 155 countries which led to a  defensive response from some industry associations. Trading across borders, enforcing contracts, dealing with licenses, closing a business, and hiring and termination were the areas where the country did not perform well. 

However, after Prime Minister Narendra Modi led the BJP government took charge at the Centre, its ranking changed little in 2017. The bankruptcy law reforms, along with few other things helped the country to improve its ranking, from 130 out of 189 in 2017, to 63 in 2020.

This improvement also triggered some triumphalism, and things escalated this year too. Principal opposition took a potshot at the PM Modi-led Centre government on its focus on improving the Doing Business ranking.

Congress leader Jairam Ramesh took to Twitter and wrote, "World Bank’s Ease of Doing Business Index was among the few global indices where India’s rank post-2014 was proclaimed as rising. Now the exercise has been found bogus and discontinued. If they start an Ease of Fudging Data Index, Mr. Modi’s so-called ‘New India’ will top the charts!"

Talking about the EBDI, it always witnessed criticism, along with the potential misuse and manipulation by powerful people. Back in time, Ramesh did not hesitate to slam the BJP. In the year 2020, he tweeted, "Mr.Modi was busy drum beating India's improvement in World Bank indices. Now the Bank has paused further publication of these rankings due to irregularities in data & methodology. So much energy of this Govt was wasted chasing a bogus ranking, while our MSMEs continued to languish!"

Allegations against BJP government: 

There were allegations against PM Modi Narendra Modi and the late Arun Jaitley, the former Finance Minister first sought to lobby the World Bank into changing its methodology to enhance its ranking. However, when it did not go accordingly, the government prioritised minor institutional and procedural tweaks to the rankings, in spite of embarking on a better agenda of economic reform. The World Bank audit, however, did not mention any fraud in India’s ranking. 

Kaushik Basu, former Chief Economist at World Bank, who supervised the release of the reports during 2012-16 said he was never pressured by any Indian governments and termed the scandal as shocking. 

Basu took to Twitter and wrote, "The news of manipulation of the World Bank’s Doing Business Ranking is shocking. DB was under my charge from 2012 to 2016. There was pressure from the govt. We NEVER gave in. Sad that this changed. I may add, to India’s credit, I never had pressure from India’s govt—current or previous."

India Eyes Opportunity:

One side where the World Bank controversy regarding favoring China is taking the globe by storm, on the other side, India is eyeing the ongoing opportunity in the global business world. This scandal may shift manufacturing supply chains to India.

Japan, India, and Australia jointly established the Supply Chain Resilience Initiative (SCRI) in April, in order to take on Chinese supply chain dominance in the Indo-Pacific region.

Future for India: 

India can definitely look for the positive road ahead and take stock of what it needs to do to make the country a better place to do business.  After the COVID-19 pandemic hit India, the economy along with many business sectors have struggled with weak investment, stagnant exports. Plus, trade disturbance with Taliban occupied Afghanistan, and economic emergency in Sri Lanka also affecting the import-export diaspora. The manufacturing sector, inadequate employment growth, and failing small businesses are a few other sectors that the government needs to take care of. 

Apart from that, the Centre should look into how withdrawing its temporary forbearance in Goods and Services Tax (GST) collection from smaller companies, are affecting them. A medium or small supplier has to pay GST upfront and recover this cash outlay when its big customer finally pays.

However, the activity of GST for smaller companies is a body blow in a framework where smaller providers can't gather installments from buyers in time and have no access to working capital loans, bridge loans, or factoring arrangements. 

Talking about the manufacturing sector, it will not grow, until an effective system of small-firm finance for everyday operations comes into force. In the interim, it needs to be feasible to adjust GST execution to make big buyers liable for tax payments, so when they postpone installments to their smaller suppliers, the latter doesn't suffer. 

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