By Sarah Watson —

The release of the World Bank’s annual Ease of Doing Business Report on October 27 brought mixed news for India. Prime Minister Narendra Modi has made improving India’s position in the global rankings a major talking point, and his supporters will likely claim some measure of victory: India’s “Distance to Frontier” (the gap between its current policies and the historical best in every area of doing business) narrowed by two percentage points, while it moved up in the rankings from 142 on the 2015 report to 130 this year. The majority of this improvement, however, is due to the World Bank’s recalculation of the 2015 data, which belatedly moved India up into the 134^th slot for 2015. Thus only a third of the change can be attributed to policies enacted in the last year. And India still languishes in the low 130s, where it’s been since 2010. Here are the key takeaway stats:

+4

India’s overall change in rank in the World Bank’s ease of doing business report.

-1.17

The average change in India’s rank in metrics responsive to federal government policies: obtaining credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

+9.75

The average change in India’s rank in metrics responsive to state government policies: starting a business, dealing with construction permits, getting electricity, and registering property.

2

Indian cities surveyed for the report, which were Delhi and Mumbai.

44

Indian cities with more than a million residents not surveyed for the World Bank report.

More important for Modi’s plans, however, is the fact that the bulk of India’s improvement in the rankings came from the sharp increase in the ease of getting (and keeping) electricity. Beginning with the 2015 data, the World Bank began to measure the reliability of electricity supply when calculating a score for “getting electricity.” The increased reliability of the power supply in Delhi and Mumbai (the two cities surveyed) allowed India to move up from 124 in the original 2015 data to 99 in the revised 2015 data, and then to 70 in 2016. Power distribution is a state subject, however, and Modi can do little more than encourage state governments to provide reliable power and to make it easier for new customers to connect.

On issues where the federal government does have greater power — i.e. protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency — India hasn’t seen any forward movement at all. In some areas, such as getting credit, it has even regressed in the rankings, as other nations have made more progress with reforms.

Much more remains to be done at the federal level. But the policies and effectiveness of India’s state governments clearly have the potential to either propel or prevent India’s rise in the World Bank rankings. The World Bank report, which surveyed only Delhi and Mumbai, offers a very narrow view of the diversity of Indian polities: in 2010 India had 46 cities with populations greater than 1 million people. These cities are located in 16 different states with 16 different policies on entrepreneurship, land acquisition, and power distribution. The Department of Industrial Policy and Promotion’s September report on state implementation of suggested business reforms helped to shed some light on the subject, but relied on the states’ self-assessments. The actual ease of doing business in much of India, therefore, remains something of a mystery.

Ms. Sarah Watson is an associate fellow with the Wadhwani Chair in U.S.-India Policy Studies at CSIS.