Govt flagged low score in World Bank’s governance index

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Govt flagged low score in World Bank’s governance index

  • India may witness a drop in WGI scores “due to the latest negative commentary on India by think tanks, survey agencies and international media.

About World Governance Indicators (WGI)

  • The Worldwide Governance Indicators (WGI) project reports governance indicators for over 200 countries for the following six dimensions of governance:
  1. Voice and Accountability
  2. Political Stability and Absence of Violence/Terrorism
  3. Government Effectiveness
  4. Regulatory Quality
  5. Rule of Law
  6. Control of Corruption

Current Performance

  • India’s scores are “much below” its peers on all counts.
  • India’s WGI score is much below the BBB Median on all six indicators.
  • WGI score below BBB Median means India falls below the middle when the scores of countries are arranged in a descending order.
  • The factors noted in the Freedom House report also led to the country receiving the largest score decline among the world’s 25 largest democracies in 2020.

The Economic Intelligence Unit (EIU)

  • It showed India’s rank in the EIU’s democracy index fell from 27 in 2014 to 51 in 2019.

Bertelsmann Transformation Index (BTI)

  • From being in the top category of ‘Democracies in consolidation’ in 2014 we have fallen to ‘Defective Democracy’.

Freedom House Report 2020:

  • Mentions “alarming setbacks in the world’s largest democracy”
  • Highlighted “a series of actions by India’s Hindu nationalist government in 2019 violated democratic rights in India and Indian Kashmir.”

Significance of Credit Ratings

  • The government noted that the WGI mattered more than the Ease of Doing Business Index.
  • A sovereign credit rating is an independent assessment of the creditworthiness of a country or sovereign entity.
  • It can give investors insights into the level of risk associated with investing in the debt of a particular country, including any political risk.
  • The government analyzed all 15 data sources whose ratings have the maximum impact on India’s overall WGI scores including:
    • The Economist Intelligence Unit
    • Varieties of Democracy Project
    • Freedom House and Heritage Foundation Index of Economic Freedom

Way Ahead

The government should reach out to these agencies, initiate continuous discussions, clearly spell out India’s reform measures and sensitize them on India’s internal matters.

Exam Track

Prelims Takeaway

  • World Governance Indicators (WGI)
  • Economist Intelligence Unit
  • Index of Economic Freedom (Freedom House and Heritage Foundation)