What if you can’t be the ‘very best’? Why, of course, you must try hard to be better at ‘being better’. Whether it is contestants in beauty pageants, educational institutions seeking to go up some notches in university/business-school rankings, or even countries which seek to attract investors by pitching themselves as ‘better’ and more attractive investment destinations, the game seems to be one of ticking the right boxes and catering to external perceptions of what matters, so as to win the game.
Take the case of the now-disgraced ‘Doing Business’ report, which was recently junked by the World Bank. The report, for the past 17 years, was followed by policymakers, corporate honchos and politicians, besides academics, and taught in business-school classrooms as a way of assessing a country’s business environment.
The junking of it has been framed as an issue related to ethical concerns, linked to data irregularities, especially in the survey’s treatment of countries such as China, Azerbaijan, the United Arab Emirates and Saudi Arabia and their being bumped up a few notches in the likely expectation of quid pro quo deals for the Bank. However, there are deeper concerns with the whole business of ratings and rankings.
Students in classrooms and media (both local and global) revel in reports of India doing better and improving its rank on the ‘Ease of Doing Business’ indicator.
India, undoubtedly, has done better, climbing a cool 79 positions in the five years between 2014 and 2019 to finally reach 63rd place (out of 190 economies) in the World Bank’s (WB) 2020 ‘Doing Business’ Report.
The obsession with ratings and rankings, in line with the predilection of Indians for tangible success metrics, results in our celebrating such ‘improvements’ without quite understanding the methodology or impact of such rankings on the larger goals affecting the lives of a larger group of stakeholders.
India’s ‘Ease of Doing Business’ is based on such ease improving in just two Indian cities, Mumbai and Delhi. Clearly, there is no reason to celebrate when only two cities do better at ‘being better’.
Of course, inspired by the ‘Doing Business’ rankings, the Indian government has initiated improvements at the level of Indian states and Union territories (UTs) as well.
In 2014, based on the 10 business topics tracked and monitored by the World Bank’s report, the Centre came up with a Business Reform Action Plan (BRAP) for Indian states and UTs.
The implementation of these rankings and the Ease of Doing reforms by those administrative units has been linked to additional borrowing permissions for states, apart from other bounties, even if these reforms may merely mean a ‘race to the bottom’.
A perusal of the ‘Business Reforms’ on the WB website indicates a high value placed on such pauperizing ‘reforms’ as the US reducing its corporate income tax rate from 34% to 21% in 2018, and Hungary cutting the social tax rate paid by its employers from 22% to 19.5% in January 2018. Should India or other emerging economies pursue such policies? This remains a moot question.
The strategies used by countries or states trying to do better for maximum pay-offs may be analysed using game theory.
Consider the Prisoner’s Dilemma, which reveals why a ‘limited’ player game, involving 190 countries and/or 29 Indian states and seven UTs, would result in predictable dominant strategies.
A dominant strategy, by definition, is superior for it promises the maximum possible pay-off irrespective of what competitors do. Pursuing ‘Doing Business’ reforms appears to be a dominant strategy for emerging countries and backward states, with larger pay-offs envisaged in terms of greater foreign investment, larger central funding, etc.
However, in doing so, they may simply act as ‘prisoners’ of a Western paradigm of development and success, choosing sub-optimal (even if dominant) strategies, with their inferior fiscal and welfare implications for India. These are strategies that devote little attention to improving social equity and addressing ecological concerns.
Ratings and rankings, in general, promote a certain homogeneous paradigm of success, one which may not be in line with the specific needs of individual countries or even institutions.
The case of the Doing Business report being abandoned holds lessons for business schools and educational institutions trying to chase sub-optimal global standards as well.
The success-fetish of management education has made it fashionable to speak of “learning from failure”, even as we prostrate at the altar of global ratings and rankings and try hard to be part of an elite club of successes.
Changing the narrative will require a concerted effort on the part of Indian business schools to cooperate, challenge and set out a set of goals that are more relevant for us.
Or else, we run the risk of being trapped in similar Prisoner’s Dilemma situations that countries participating in the WB rankings found themselves in.
The WB has resolved the dilemma for participating countries for now by dumping that report. Countries may find themselves free to pursue different goals. Can Indian educational institutions now solve the Educator’s Dilemma for themselves?
https://www.livemint.com/opinion/online-views/the-doing-better-syndrome-and-our-prisoner-s-dilemma-11632247006971.html
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.