Economic Freedom in India

While economic freedom can be only one of many factors that influence economic growth, the big picture emerging from data from a study in India is that, largely, states with increasing freedom are growing faster, and those with worsening freedom are growing slower, says Swaminathan S. Anklesaria Aiyar, a research fellow at the Cato Institute's Center for Global Liberty and Prosperity.

  • The only two Indian states that showed a large increase in economic freedom between 2004-2005 and 2008-2009 were Andhra Pradesh and Gujarat – they averaged 10.5 per cent annual state gross domestic product (GDP) growth.

  • States with a moderate rise in economic freedom averaged 8.1 per cent annual growth.

  • States with a moderate fall in freedom averaged 8.7 per cent annual growth.

  • And those with large falls in freedom averaged only 6.7 per cent.

    Aiyar's report focuses on three categories of freedom at the state level:

  • One is the size of government relative to state GDP.

  • The second is legal structure and property rights.

  • The third is regulation of business and labour.

    Source: Swaminathan S. Anklesaria Aiyar, Freedom Means Faster Growth, Cato Institute, March 16. 2011.

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    First published by the National Center for Policy Analysis, United States

    FMF Policy Bulletin/ 29 March 2011
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