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WORLD INDICES

20th May, 2022

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Context

  • The recently released Worldwide Governance Indicators by World Bank and Freedom House Report have downgraded India’s score and this may affect India’s sovereign ratings.
  • The Ministry of Finance’s Economic Division is planning to draft a strategy named “Subjective Factors that impact India’s Sovereign Ratings: What can we do about it? to counter the ‘negative commentary’ on India by various global think tanks, indices and media.

 

About Sovereign Credit Rating

  • 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.

 

About Worldwide Governance Index

  • The Worldwide Governance Indicators are a collection of responses from a wide range of people acquired through a variety of surveys as well as other cross-country governance evaluations.
  • The World Bank’s World Governance Indicators provide a ranking of 215 countries and territories based on six dimensions of governance:
    • Voice and Accountability
    • Political Stability and Absence of Violence
    • Government Effectiveness
    • Regulatory Quality
    • Rule of Law
    • Control of Corruption
  • 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, WGI scores below BBB Median would suggest that India falls below the middle when the scores of countries are arranged in descending order.

About Freedom House

  • USA based human rights watchdog Freedom House, which is largely funded through USA government grants, has been tracking the course of democracy since 1941.
  • The scores are based on:
    • Political rights indicators such as the electoral process, political pluralism and participation and government functioning.
    • Civil liberties indicators are related to freedom of expression and belief, associational and organizational rights, the rule of law and personal autonomy and individual rights.
    • Countries are declared as “free”, “partly free” or “not free”.
  • Its 2020 report mentions alarming setbacks in the world’s largest democracy (India) and highlighted that a series of actions by India’s Hindu nationalist government in 2019 violated democratic rights in India and Indian Kashmir.

 

Other Indicators

  • The Economic Intelligence Unit (EIU) Global Democracy Index showed India’s rank in the EIU’s democracy index fell from 27 in 2014 to 51 in 2019 and considered India a flawed democracy.
  • In the Bertelsmann Transformation Index (BTI), India has fallen into Defective Democracy.
  • The Reporters Without Borders in its 20th World Press Freedom Index 2022, ranked India 150 from 142.
  • In the Heritage Foundation Index of Economic Freedom, India’s Economic Freedom Score has been “Mostly Unfree” since Heritage Foundation started publishing data in 2008.

 

https://indianexpress.com/article/india/govt-flagged-low-score-in-world-banks-governance-index-7924696/