Why 'Ease of doing business report' by World Bank in under fire.

Backdrop of the story
Recently a famous report by World Bank titled as 'Ease of doing business report' was under fire for unsystematic ranking and succumbing to political pressure. It was especially for 2018 & 2020 version of the said report. So What is the World bank? What importance this report has? Why the World bank is under criticism?. let's answer all those questions in today's weekend pill.

What is the World Bank?
Founded in 1944, it is a financial institution based in Washington DC with 189 countries as its members. It provides grants and loans especially to developing countries for financing big public works projects. It has motive like eradicating poverty from world and providing financial advice to developing countries.

What is 'Ease of doing business report'?
It is an annual report compiled by World bank to rank economies around the world based on their welcoming policies of Foreign direct investment (FDI). It analysis the countries policies, import levies, tax complications and based on that ranks countries. It is important for investors looking to invest globally & for manufacturer to setup their next plant. Many people rely on this ranking to make vital decisions. Hence we could say that because it is an important report & had some flaws, it is under criticism. (Did you know India's rank in 2020 edition of the report was 63rd, up 17 ranks from previous year rank)

Why the report is under criticism?
In 2018 edition the then economist of the World bank Paul Romer resigned stating how the report treated Chile. The South American country had plunged in power despite little actual change in policies. According to Money control article, Justin Sandefur a senior fellow at the center says that report fails to assess the government intervention in the economy, any benefits from state spending or worker and consumer protection. Wilmerhale a law appointed to investigate the matter said that World bank staffers were compiling data to rank China at 85th from 78th the year before. This was to come at a time when World bank was trying to raise capital an effort in which Beijing, the 3rd largest shareholder of bank was to play a key role. Subsequently China was ranked 78th, where it was previous. Law firm also concluded that bank staffer's knew about the misconduct but were feared retaliation including dismissal. However many experts around the world feel that the report was already losing its credibility as to how the data was presented following the intervention by various government.

'Ease of doing business' was launched in 2002, it was a credible report for many years, even now many countries tout their rankings on the report. Its still relevant to some, and it is not a complete biased report. Its just the methodology that needs to be corrected, and try to make it unbiased. World bank is a great institution for developing economies, it has funded many important projects around the world, if it tries to correct these things it can be of great help to World.

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Disclaimer - Above information is to spread financial literacy. We are not SEBI registered financial advisor, kindly consult your financial advisor before taking any investment decision.

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