Take Global Rankings With A Grain of Salt

Global rankings deflect attention from real issues by either creating a false sense of complacency or triggering unnecessary apprehensions        

Today, hundreds of global rankings exist, measuring everything from hunger to human development, from the ease of doing business to economic freedom, and from democracy to corruption. India seems obsessed with global rankings.?An improvement in ranking creates huge fanfare, while a decline creates much political noise.?

Both critics and supporters fall into the trap of declaring victory or defeat based on such reports' annual rankings. Following India's Global Hunger Index (GHI) rank drop from 101 to 107 this October, the opposition made a lot of noise about the government's perceived failure to feed its people. Similar was the case in 2021 when India's ranking worsened from 94 to 101. In response to the report's findings, the government questioned the methodology used to create the rankings. In contrast, when the rank of India improved on the Ease of Doing Business (EoDB) index from 77 in 2018 to 63 in 2019, the government trumpeted it as proof of its pro-business policies, while skeptics questioned their relevance.?

Taking three illustrative examples of the Global Hunger Index (GHI), Human Development Index (HDI), and Ease of Doing Business (EoDB) index, I argue that such rankings should not be overread for five reasons - the indexes used are contextual, based on weights equating non-comparable and often correlated variables, suffer from sample selection bias, have questionable reliability, and oversimplify complex issues.?

• It is imperative to consider the context when making global comparisons on a given parameter. Most rankings, however, fail to take this factor into account. The Global Hunger Index (GHI), for example, includes stunting as one of its indicators for all countries alike. There is clearly a problem here. The definition of stunting in Denmark, for example, will differ from that in Japan. Danish stunted children may actually be taller than Japanese normal-weight children. In a similar vein, the definition of hunger itself can be contextual. In fact, an Expert Committee constituted by the Indian Council of Medical Research (ICMR) in 2019 concluded in its report that the four indicators used in the GHI - undernourishment, stunting, wasting and child mortality - do not measure hunger per se, since they are not manifestations of hunger alone.?
• A number of parameters are weighted in order to calculate an index. To create rankings, these parameters are added together to arrive at a single number. It is easy to see how it can lead to a number of technical problems. In the Human Development Index (HDI), for example, weights are assigned to certain factors with equal tradeoffs even though these measurements may not always be equally valuable. There are different combinations of life expectancy and gross national income (GNI) per capita that can be used to achieve the same HDI. According to this, a person's life expectancy has varying economic value based on where he or she lives, which is clearly a problematic proposition. Similarly, data on different parameters may be highly correlated. For instance, the GDP per capita and the average level of education in countries are strongly correlated. Two highly correlated indicators may provide only marginally additional information compared to one.
• In many cases, rankings are prepared by surveying samples that are highly biased. When it comes to the Ease of Doing Business (EoDB) rankings, in most countries only one city is surveyed, while in countries with high populations, such as India, two cities are surveyed. For example, the latest EoDB survey used data from Mumbai and New Delhi, which are not representative of the entire country. Due to their size and wealth, they have better infrastructure, legal systems, and government services. Therefore, a Tier 2 or 3 city's perception of the ease of doing business will be vastly different from that of Delhi or Mumbai.?
• Recently, many of these indices have been questioned for their reliability. In light of allegations of data manipulation for countries like China, Azerbaijan, and the UAE, whose EoDB ranks have changed significantly in a short span of time, doubts have been raised about the reliability of these statistics. World Bank management reported internal data irregularities with Doing Business reports of 2018 and 2020 during the summer of 2020, halting the next report and initiating a series of reviews and audits. Moreover, report findings can sometimes be highly counterintuitive. For example, critics have pointed out that India, the fifth largest economy, cannot be ranked so low on the GHI, let alone be placed behind much poorer countries like Pakistan and Bangladesh.?
• Indexes are only single numbers and can't provide a comprehensive picture of a country's performance. There are many critical factors that can be ignored when creating such rankings. The EoDB, for instance, measures the length of time required for certain procedures. However, it leaves out relevant parameters like policy uncertainty or even hostility, as in the case of the retrospective tax. Similarly, HDI may obscure income inequality and key human development differences by focusing on averages. It is also possible to improve rankings by focusing exclusively on one parameter and ignoring others. The allegations that India could manage to improve its standing in the EoDB ranking by concentrating disproportionately on the ease of getting an electricity connection is just one of the many examples.?

There is an opportunity cost associated with global rankings. A lot of political capital is invested in creating the perception of success after favorable rankings or ridiculing the same after poor rankings. It deflects attention from real issues by either creating a false sense of complacency or triggering unnecessary apprehensions. Instead of chasing ranks that are always fraught with problems, the government should focus on delivering what really matters. As a citizen, take these reports with a grain of salt.