UPA's parting gift: Ease of Business rank slips to 142, but even this was a freak result

If we need anything to sum-up the legacy of the UPA, we can do no better than to look at the World Bank's Doing Business Report 2015. Our ranking has slipped from 140 to 142 in a field of 189 countries. And even this figure may have been achieved fortuitously through ranking methodology idiosyncracies.

Given the complete failure of governance and leadership in the final years of the UPA, this is not surprising. Of the 10 parameters on which this ranking was decided, India slipped on nine of them (read here) - everything from starting a business to obtaining credit to enforcing contracts. Name it, and we are sinking on most parameters.

And the one parameter on which we did better is an unbelievable one - protecting minority shareholders - where our rank is seven, up dramatically from 21 earlier. This means we are the seventh best country in terms of protecting minority investors - a result which will surprise most Indians. This, when the US, which regularly sends crooked investors and top managers to jail for corporate misdemeanours, is ranked well below India at No 25.

Clearly, this is an oddball result. For, if anything, the government of India has done nothing but damage to the interests of minority shareholders in almost every public sector company - from ONGC to Coal India to MTNL. A few years ago, Goldman Sachs accused ONGC of bad corporate governance for allowing the government to transfer profits from it to the oil marketing companies. Two years ago, The Children's Investment Fund (TCI), a UK-based investor, sued Coal India for kowtowing to government price diktats. The board was sued for bad governance practices.

More recently, minority investors have taken Suzuki to task for trying to shift a new car plant in Gujarat to a wholly-owned 100 percent subsidiary of Suzuki. The matter is still to be resolved.

Even this solitary improvement in our ranking seems to be a freak case unrelated to real improvements in the ease of doing business in India. Most probably, a lot of other countries may have slipped badly on this score, making India seem better in comparison. One-eyed in the land of the blind.

In fact, the point to note is not India's ranking slippage, but its improvement in the overall distance from frontier (DTF) score - where we have improved from 52.78 to 53.97. DTF measures how far we are from the best possible performance, and a higher score means we are improving.

But this is the sad part: if despite improvements we are still slipping in rank, it means some other countries are improving even faster. The world is not a static pace, and success depends not in a general improvement, but an improvement in relative terms. We have to run faster than the others to improve our rankings.

The other possibility is that even this improvement may be surreal, especially if we treat the dramatic improvement in "protecting minority shareholders" as an unexpected outlier unrelated to our actual performance on this score.

It would be interesting check where India would have ranked but for this unusual score on protecting minority shareholders.

The UPA probably would have landed us even lower in the World Bank's pecking order but for this anomaly.

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Updated Date: Oct 30, 2014 17:01:46 IST