Govt flagged low score in World Bank’s governance indicators

In an analysis of the World Bank’s World Governance Indicators, a key input for India’s sovereign ratings, a presentation by the Ministry of Finance’s Economic Division found that India’s scores were “much below” its peers on all counts. It also said 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.

Finance Ministry’s economic division was drafting a strategy to counter the “negative commentary” on India by global think-tanks, indices and media, amid worries this could lead to downgrading of sovereign rating to “junk”. In June 2020, then Principal Economic Advisor in the Ministry of Finance, Sanjeev Sanyal, prepared a presentation — “Subjective Factors that impact India’s Sovereign Ratings: What can we do about it?” — for internal circulation within the government.

The World Bank’s World Governance Indicators provide a ranking of 215 countries territories based on six dimensions of governance: ‘Voice and Accountability’; ‘Political Stability and Absence of Violence’; ‘Government Effectiveness’; ‘Regulatory Quality’; ‘Rule of Law’ and ‘Control of Corruption.’

Sanyal’s presentation showed the government felt there was a danger India may witness a drop in WGI scores “due to the latest negative commentary on India by think tanks, survey agencies and international media,” it had noted.

The presentation noted India’s WGI score is much below the BBB Median on all six indicators. While BBB is an investment-grade rating issued by global rating agencies such as S&P and Fitch, a WGI score below BBB Median would suggest that India falls below the middle when the scores of countries are arranged in a descending order. 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.

To understand this, the government analysed 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 among others.

It noted that the Freedom House Report 2020 mentions “alarming setbacks in the world’s largest democracy” and highlighted that “a series of actions by India’s Hindu nationalist government in 2019 violated democratic rights in India and Indian Kashmir”.

It also noted that Kashmir went from “partly free” since 2017 till 2019 to “not free” in 2020 scoring 8 (out of 40) in Political Rights, 20 (out of 60) in Civil Liberties. Its total score was 28 (out of 110) compared with 50 (out of 100) in 2017, 49 in 2018 and 49 in 2019.

On one of the governance indicators of the WGI, the Cingranelli Richards Human Rights Database & Political Terror Scale (HUM), the government noted that Amnesty International did not publish its full report and had no data on India.

Notably, it said that the US State Department mentioned the following: “In 2018, the BJP-led government harassed and at times prosecuted activists, lawyers, human rights defenders and journalists for criticising authorities. Draconian sedition and counterterrorism laws were used to chill free expression. Foreign funding regulations were used to target NGOs critical of government actions or policies…”

Recently, the Supreme Court put on hold pending trials under the sedition law, till the government completes the promised exercise to reconsider and re-examine the provision.

Its analysis of the Economic Intelligence Unit (EIU) showed India’s rank in the EIU’s democracy index fell from 27 in 2014 to 51 in 2019. On “What does EIU say about India in its Democracy Index?”, it noted that India slipped to the 51st place from 42nd on EIU’s 2019 Global Democracy Index and remains classified as ‘flawed democracy’. India’s overall score fell to 6.90 in 2019, lowest since the index was first published in 2006. The score has been continuously declining since 2014, when it was 7.92.

In the Bertelsmann Transformation Index (BTI), the government noted that under ‘Political Transformation’: “From being in the top category of ‘Democracies in consolidation’ in 2014 we have fallen to ‘Defective Democracy’.”

It also noted foreign NGOs have been further curtailed in their activities. It added that ABVP created a climate intimidation at university campuses, for example at JNU in New Delhi.

“Freedom of expression has been severely curtailed, while traditional media and especially journalists critical of the government have been openly persecuted. Freedom of Expression score has worsened from 8 in 2015/16 to 6,” it said.

Even in the analysis of the Heritage Foundation Index of Economic Freedom, the presentation noted “India’s Economic Freedom Score has been “Mostly Unfree” since Heritage Foundation started publishing data in 2008.”