The article commences with the recent revelation of the World Governance Indicators (WGI) by the World Bank. Essential to determining a country’s sovereign credit rating, these indicators have highlighted a concerning decline in India’s credit rating due to poor performance in WGI parameters.
Understanding the World Governance Indicators
The World Governance Indicators serve as a comprehensive research dataset. They compile the perceptions of a diverse group of corporate and citizen respondents, as well as expert opinions from both developed and developing nations, on governance quality. These indicators assess 215 countries and territories against six crucial criteria: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption.
India’s WGI score significantly trails the BBB Median across all six indicators – a concerning fact considering the BBB is an investment-grade rating issued by international rating agencies such as S&P and Fitch. This low ranking indicates that India falls below the median when comparing country scores in descending order.
Basis for India’s WGI ranking
A collection of reports contribute to India’s WGI ranking, including those from the Economist Intelligence Unit, Varieties of Democracy Project, Heritage Foundation Index of Economic Freedom, and Freedom House Report.
Consequences of WGI outcomes
The unfavorable WGI results have potential dire repercussions for India. A critical concern is the worsening of India’s Sovereign Credit Rating, which leads to a decreased credit worthiness. This situation can make investments in India’s debt market risky, factoring in political risk and potentially undermining investor confidence in the nation’s economic and political stability.
Incidents impacting India’s WGI rank
Several incidents and conditions have negatively impacted India’s WGI rank. One major incident involves Kashmir’s status, with its freedom being partially reinstated from 2017 to 2019, only to be curtailed again in 2020. This situation led to the following scores: Political Rights at 8 out of 40, Civil Liberties at 20 out of 60, and an overall Total score of 28 out of 110.
The US State Department highlighted concerns such as harassment of activists, including lawyers, human rights defenders, and journalists. They also voiced concern over the usage of sedition and counterterrorism laws to stifle free speech, along with misuse of foreign funding regulations to target NGOs critical of government policies or conduct.
In addition, the Economic Intelligence Unit (EIU) showed India’s rank in the EIU democracy index falling from 27 in 2014 to 51 in 2019.
About the Economic Intelligence Unit
The Economic Intelligence Unit, a research and analysis division of The Economist Group, was established in 1946. Its fundamental purpose is to assist businesses, financial firms, and governments in navigating the consistently changing global landscape. It played a significant role in ranking India on the EIU democracy index.
Last Modified: February 15, 2024