Economic Freedom of the States of India 2013: Gujarat at the Top, Bihar at the Bottom
Last evening we attended launch of the “Economic Freedom of the States of India Report 2013”, jointly published by the Cato Institute, the Friedrich Naumann Foundation, Indicus Analytics and Academic Foundation.
The event marked 10th year of a novel exercise in publishing the index. The index that ranks 20 major Indian states is based on the Fraser Institute’s Economic Freedom of the World (EFW) report, result of a project begun in 1980s that has come to present empirical evidence that economic freedom leads to prosperity, growth and improvements in human well-being.
The states are ranked based on their performance on three broad areas of:
- Size of government: expenditure, taxes and enterprises.
- Legal structure and security of property rights.
- Regulation of labour and businesses.
Gujarat has once again emerged as the freest state in India. Chhattisgarh has registered the biggest improvement having moved from 16th to 8th position. Bihar continues to be at the bottom of the index. We reproduce below a table from the report that summarises ratings and ranks of the states.
Tamil Nadu, Andhra Pradesh, Haryana and Himachal Pradesh have managed to improve/maintain their rankings from last time in 2011 (the report was published in early 2012), even when their ratings have declined. While in the bottom half of the table, states of Jharkhand and Punjab have slipped in rankings even while they have marginally improved their ratings. It could be so because freer states are finding it difficult to become more free as against the not-so-free states. As one would expect, marginal improvement in ratings is rather difficult as a state becomes more free. However, having extended its lead at the top by registering the fastest rate of improvement, the evidence of Gujarat disproves that claim.
Almost one-third of the report has been dedicated to study the developments in Bihar. Bihar’s journey to improved economic freedom (while Bihar still ranks at the bottom of the table, it has improved its score in the last three consecutive reports), as documented by Swaminathan Aiyar is a fascinating read. Also interesting is the chapter on centre-state relations penned by Bibek Debroy.
To read more analysis of the report, please see Seetha’s piece over at Firstpost. Hindustan Times has a piece on the report as well.
