Question of Priorities: A tale of two global rankings

Two global rankings were announced recently. One was the 2019 ‘Doing Business’ report published by the World Bank, which was earlier called the ‘Ease of Doing Business’ (EoDB). India jumped up to a rank of 63 from 77 last year. The improvement is dramatic, and in just five years India has improved its global position from 142 to 63. It is in line with Prime Minister Modi’s goal of being in the top 50 countries of the world by next year. India has maintained its position as a top 10 reformer in the world for the past three consecutive years. What does this say? That if we want to create millions of jobs and livelihoods every year for those entering the workforce, we need to create thousands, if not lakhs, of new enterprises.

The ‘Doing Business’ rank tells us how easy it is to start a new business, and how business-friendly are the regulations. By focusing on pro-market reforms, like ease of getting construction permits, or access to credit and electricity, the ranking has greatly improved. The biggest reform has been the roll-out of the insolvency and bankruptcy code, which helps restructure or liquidate unviable businesses. The mere existence of the code also improves credit discipline. If you break down the ranking into its 10 metrics, we see that India improved its rank on seven of them. These include the metric of ‘resolving insolvency’, or ‘trading across borders’ and ‘taxation’. The sharp drop in corporate income tax rate announced recently will help improve India’s rank further.

But one area where the improvement is sluggish is ‘starting a new business.’ The number, and especially the procedures, of permits and registrations required, is still burdensome. It’s not the number of regulations, but the speed and convenience of complying with them that is critical. The toppers, like Switzerland or Singapore, don’t have fewer regulations, but complying with them is a well-defined, predictable process. India needs to do much more on this count. Permits and regulations can be issued at three levels of the government, which makes it more complicated. Also, if governments start reneging on their promises (as on retrospective taxation, or cancelling contracts like power purchase agreements), it hurts the ease of doing business. The Doing Business methodology only samples establishments from a narrow sample within each country, so we should not become complacent with our global ranking progress. Indeed, the Niti Aayog has its own methodology to compare the EoDB across states, which gives a useful complementary picture. Despite rank 63, we have a long way to go to improve the ground reality, especially for small and medium enterprises that are waiting to be born.

The other global ranking announced recently was the Global Hunger Index, published by the International Food Policy Research Institute. Like Doing Business, this index and ranking has been published for nearly 20 years. But unlike the former, the methodology has changed over the years and the sample of countries has increased substantially. Most worryingly, India is ranked at 102 out of 117 this year, behind countries like Pakistan (94), Bangladesh (88) and Sri Lanka (66). The index consists of four components, of which three affect child hunger. These are undernourishment, child wasting, child stunting and child mortality.

The report says that only 9.6% of the children in India below 23 months of age get adequate nutrition. India’s hunger and malnutrition rank continues to slide down, unlike its dramatic jump up in EoDB ranking. The hunger index report is corroborated by India’s own Comprehensive National Nutrition Survey (CNNS) which is based on a sample of more than 1 lakh children across 30 states. It is very comprehensive, statistically sound, and goes deeper into details like micro-nutrients, disease prevalence, diet, apart from measures of stunting and wasting. One surprising finding is that across 29 states, the relatively affluent states fare poorly on child hunger and nutrition. The healthiest children live in the North-Eastern States and Kerala, while Gujarat turns out to be the unhealthiest, as per the data. The state of India’s children’s health is clearly very unsatisfactory, which is what the Global Hunger Index ranking is telling us. On the methodology, there has been a rebuttal of sorts from Niti Aayog, which said that India’s improvement in stunting and child mortality is underestimated by the GHI 2019. Based on CNNS findings (which point to poor child health), they point to some inconsistency with GHI findings. India’s directional improvement, as per the Niti Aayog analysis, is that stunting has gone down from 38.4 to 34.7%, wasting from 21 to 17.3%, and underweight from 35.7 to 33.4%. These numbers are heartening but still a long way from, say a peer like Sri Lanka, or the numbers observed in our own Arunachal Pradesh or Assam.

So, there you have it, one global rank gives us occasion to celebrate vast improvement in doing business, another global rank is cause for great worry on lack of progress in child nutrition and health. Our goal of reaching a $5 trillion economy in the next five years is so that everyone benefits from that inclusive growth. That growth is not an end in itself, but a means to improve lives. Thus, the EoDB is an input measure whereas the child hunger index is an output measure. We improve inputs so that the ultimate output (health, wellbeing, standard of living, less inequality) is also improved. While we work ceaselessly to have economic reforms that are market and business-friendly, which support jobs and livelihood creation, let’s not lose sight of output measures like child mortality and other health indicators.

There are other indicators like air and water quality, too, which cannot be allowed to deteriorate in our quest for a fast-growing, large economy. The two global rankings coming coincidentally is a welcome reminder of what we need to do and our priorities.

(The writer is an economist and Senior Fellow, Takshashila Institution) (Syndicate: The Billion Press)