Worldwide Governance Indicators

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Recently, the Chief Economic Adviser of India raised concern over the use of World Bank’s Worldwide Governance Indicators in ratings assessment by credit ratings agencies, especially for emerging economies.

About Worldwide Governance Indicators

  • It is released by the World Bank.
  • It provides a ranking of 215 countries' territories.
  • It is based on six dimensions of governance:
    • Voice and Accountability’;
    • ‘Political Stability and Absence of Violence’;
    • ‘Government Effectiveness’;
    • ‘Regulatory Quality’;
    • ‘Rule of Law’
    • Control of Corruption.’
  • These indicators are designed to help researchers and analysts assess broad patterns in perceptions of governance across countries and over time.
  • The World Bank compiles the Worldwide Governance Indicators using data from more than 30 think tanks, international organisations, non-governmental organisations, and private firms deemed credible.
  • The WGI were developed in 1999 by two World Bank researchers, Daniel Kaufmann and Aart Kraay.
  • The data are updated annually each September.

Key facts about World Bank

  • It is an international financial institution that provides loans and grants to the governments of low and middle-income/developing countries to pursue capital projects.
  • It was established along with the IMF at the 1944 Bretton Woods Conference.
  • The WB Group Includes
    • International Bank for Reconstruction and Development (IBRD): It provides loans, credits and grants.
    • International Development Association (IDA): It provides low or no-interest loans to low-income countries.
    • International Finance Corporation (IFC): It provides investment, advice and asset management to private companies and governments.
    • Multilateral Guarantee Agency (MIGA): It ensures lenders and investors against political risks such as war.
    • International Centre for the Settlement of Investment Disputes (ICSID): It settles investment disputes between investors and countries.
  • India is not a member of ICSID.

Q1) What is International Finance Corporation (IFC)?

It is a member of the World Bank Group and is focused on promoting private sector investment in developing countries. Its primary goal is to create opportunities for people in developing countries by supporting private sector development, mobilizing private capital, and providing advisory services and expertise to businesses and governments.

Source: Need for World Bank’s governance indicators to be transparent: CEA