Guest blogger, Shubhangi Agarwalla, investigates India’s use of the Ease of Doing Business (EDB) Index as a development indicator.
“The main advantage of showing a single rank: it is easily understood by politicians, journalists, and development experts and therefore created pressure to reform. As in sports, once you start keeping score everyone wants to win.”
-World Bank Staff Report, 2005
That is precisely what Genuine Progress Indicators (GPIs) aim to do. They simplify a complex regulatory reality, compare all states along a set of actionable indicators, and publicize the resulting rankings to media hungry for simple headlines. As David Kennedy has cogently argued contestation among experts over the best ways to measure and compare economies is a defining feature of our globalised international order. Wielding comparative information using simple rankings is designed to alter shared information, affect third-party beliefs and opinions, and ultimately convince targets that their reputation or relative status is at stake, potentially with material and/or social consequences.
Social pressure of this kind is evident in the area of business deregulation. Since the mid-2000s the World Bank has used rankings to influence the regulatory policies of countries worldwide. By creating the Doing Business Report and the Ease of Doing Business (EDB) Index, the bank has decisively shaped states’ regulatory behaviour, especially in emerging markets and developing countries. The index is focal to this discussion in part because it was one of the first to successfully harness broader intellectual and ideological trends, to link development with a country’s business-friendly environment, and thus to ride the crest of the deregulatory wave of the Washington Consensus touted by prominent economists.
Analysing the Impact of the Report on State Governance
Once you start keeping score, everyone wants to win. Since its inception, the EDB has recorded over 3,500 reforms globally in 10 areas of business regulation and reported a peak in reform activity worldwide in 2017-18, with 128 economies undertaking a record of 314 reforms.
In India too, Narendra Modi began to focus on the EDB Index late in his 2013 campaign for prime minister. Emphasizing the business-friendly roots of his political party, the Bhartiya Janata Party (BJP), Modi blamed India’s poor rating on the ruling Congress Party and promised to improve the ranking. The BJP implicitly included EDB Index improvement in the 2014 party platform when it promised “making ‘doing business’ in India easy.
Modi has always been clear that his EDB-related reforms were not about improving microeconomic incentives but about signaling a welcoming investment climate through a higher EDB ranking. In his speech announcing his EDB effort, Modi declared that “industrialists don’t come due to some fancy incentive scheme.” Instead, he argued that “the investor first wants the security of his investment. Growth and profit come later”. For that reason, India needed to send a signal to investors that “your money will not sink.” The EDB initiative was part of that signaling effort and Modi committed his entire team in government to improve India’s ranking from 130 to 50, and then later to 30. While the reforms adopted may well have economic benefits that ordinarily could explain their adoption, they were undertaken for symbolic rather than economic value. The prime minister’s words and behavior reveal a belief that rankings matter more than economic incentives—they improve India’s reputation, and thereby attract investment.
Roughly a month after Modi announced the initiative, DIPP published a report with forty-six policy proposals across several government ministries hewing almost precisely to the bank’s subindicators and intended to improve India’s ranking. The Indian government has adopted many of these reforms, including reducing the number of days it takes to register a business from twenty-seven to one; simplifying application forms for industrial licenses; placing license applications online; exempting several business from licensing requirements; extending the validity of licenses. The effort has been mentioned in party platforms, is explicitly coordinated through interagency mechanisms, and is implemented in part through local governments by using subnational rankings to stimulate competition, embarrass opponents, and reward supporters.
According to a study by Santosh Mehrotra and Jajati K. Parida of the Centre of Sustainable Employment at Azim Premji University, total employment dropped by 9 million – from 474 million to 465 million between 2011-12 and 2017-18 for the first time in Indian history. The report calculated a high unemployment rate of 8.8 per cent in 2017-18 up from 3 per cent in 2011-12. The high rates of growth have not translated into jobs. This is coupled with informality of labour and a gender wage gap. According to the State of Employment 2019 report by Oxfam India, women on average are paid 34 per cent less than male workers doing the same task. Meanwhile, net foreign direct investment decreased from $31.2 billion in 2014 to $30.7 billion in 2018-19. This is also true for portfolio investments which plummeted from $4.8 billion in 2014 to $618 million in 2018.
We are increasingly in a setting where centers in the Global North are rating the rest of the world. That is something we should at least be aware of going forward. They have ideological bents and there are winners and losers from each perspective. What this means is that development indicators such as the EDB frame both objects and outcomes through a transformative lens which conflates means and ends; equating the collection of ever more quantifiable and globally commensurable data points with the project of realizing stated ambitions of global development institutions. Thus, creation of indicators reveals a slippage between the political and the technical. The slippage occurs in the way issues and problems are defined, in the identity and role of experts, in the relative power of the people engaged in producing and using indicators, and in the power and clout of the sponsoring organization. Through the apparatus of science and measurement, the indicator displaces judgment from governing bodies onto the indicator itself, which establishes standards for judgment. Nevertheless, we must remember that indicators are inevitably political, rooted in particular conceptions of problems and theories of responsibility.
Shubhangi Agarwalla is a student at National Law University Delhi and a Research Assistant to Professor Dire Tladi at the United Nations International Law Commission. She regularly writes on issues of international law in national and international journals and runs a blog to discuss international law from a global south perspective called internationallawandtheglobalsouth.wordpress.com.
The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.