EAC-PM Paper on Decline in India’s Rankings on Global Indices

The Economic Advisory Council to the Prime Minister (EAC-PM) has issued a working paper titled “Why India does poorly on global perception indices: Case study of three opinion-based indices”. It was written by economists Sanjeev Sanyal and Aakanksha Arora.

What did the working paper say?

  • India’s ranking is declining on several global opinion-based indices because of serious issues with the methodology used by them.
  • The paper assessed three perception-based indices – the Freedom in the World Index, Varieties of Democracy (V-DEM), and EIU Democracy Index.
  • These indices are mainly based on the opinions of a small group of unknown experts.
  • The questions used for these indices are highly subjective and are worded in a way that it is impossible to answer objectively.
  • These indices also excluded questions that need to be asked to get an objective conclusion.
  • There is also a lack of transparency regarding how the experts are chosen from each country, their expertise, or nationality.
  • In the V-DEM, India scored well in objective parameters like the share of the population with suffrage. Its scores in subjective subindices have been declining since 2014.
  • The EIU Democracy Index not only depend on expert opinions but also responses from opinion polls, especially from World Value Survey (WVS). In the absence of opinion polls, the responses to these questions are also answered by experts. In case of India, the latest WVS report is of 2012. This means that the EIU Democracy Index for India is based only on expert opinions since 2012.
  • Despite these issues, the paper highlighted the importance of perception-based indices. They should not be ignored as mere opinions since they can find their way into concrete things like sovereign ratings via worldwide government indicators (WGI), which is based on a combination of these indices. They are expected to become even more important in the future since Environmental, Social and Governance (ESG) indices are expected to play a major role in investors’ or business decisions.
  • Hence, authors of the paper recommended that the Indian Government must request the World Bank to increase transparency and accountability from these institutions while providing inputs for WGI.
  • It also recommended that the independent Indian think-tanks to conduct similar perception-based indices for the world to break the monopoly of several western institutions.

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