INDIA RATED 6.64 FOR ECONOMIC FREEDOM
HONG KONG AND SINGAPORE NUMBER ONE AND TWO
September 16, 2008
For Immediate Release
NEW DELHI, INDIA—INDIA ranked
70, in the Economic Freedom of the
World: 2008 Annual Report, released today by CENTRE
FOR CIVIL SOCIETY (CCS).
Last year India ranked 68.
“‘Rich are getting richer and poor are
becoming poorer!’ is now a common refrain in
India in any discussion on economic reforms. Since
1991, India has undergone a great deal of liberalization
internally and externally. Many feel that the gains
of this liberalization and globalization have not
accrued to the poor. The reason is simple: the areas
in which the middle and upper classes make their living
have seen the highest degree of liberalization, while
the areas in which the poor earn their livelihood
have seen the fewest reforms.
Unequal distribution of Economic Freedom is at the
basis of India’s uneven development. The government
must first remove all hurdles by applying the Livelihood
Freedom Test. Test all existing rules and regulations
for their impact on the freedom to earn an honest
living. Does any law restrict opportunities for any
person to earn a living, particularly in a profession
that requires little capital or skills? If so, then
Review, Revise, or Remove. With the higher degree
of economic freedom, we would achieve more equitable
and inclusive growth,” said Dr Parth J Shah,
President, CCS.
The report ranks Hong Kong number one, followed by
Singapore then New Zealand. Zimbabwe once again has
the lowest level of economic freedom among the 141
jurisdictions included in the study, followed by Angola
and Myanmar.
The annual peer-reviewed Economic Freedom of the World
report is produced by Canada’s Fraser Institute
in cooperation with independent institutes in 75 nations
and territories.
It uses 42 different measures to create an index
ranking countries around the world based on policies
that encourage economic freedom. The cornerstones
of economic freedom are personal choice, voluntary
exchange, freedom to compete, and security of private
property. Economic freedom is measured in five different
areas: (1) size of government; (2) legal structure
and security of property rights; (3) access to sound
money; (4) freedom to trade internationally; and (5)
regulation of credit, labor and business.
Research shows that individuals living in countries
with high levels of economic freedom enjoy higher
levels of prosperity, greater individual freedoms,
and longer life spans. This year’s report also
contains new research showing the impact of economic
freedom on poverty reduction.
“Economic freedom is one of the key building
blocks of the most prosperous nations around the world.
Countries with high levels of economic freedom are
those in which people enjoy high standards of living
and personal freedoms. Countries at the bottom of
the index face the opposite situation; their citizens
are often mired in poverty, are governed by totalitarian
regimes and have few if any, individual rights or
freedoms,” said Dr Parth J Shah, President,
CCS.
The full report is available at www.freetheworld.com
INDIA scores in key components of economic freedom
(from 1 to 10 where a higher value indicates a higher
level of economic freedom):
- Size of the government: changed to 7.14 from
7.17 in the last year’s report
- Legal structures and security of property rights:
changed to 6.12 from 6.72
- Access to sound money: changed to 6.70 from 6.84
- Freedom of trade internationally: changed to 6.82
from 6.36
- Regulation of credit, labour and business: changed
to 6.17 from 5.69
The 2008 Economic Freedom Index is based
on 2006 data
India’s rating has increased from 6.31 in 2001
to 6.64 in 2006 but at the same time its rank has
fallen from 65 to 70. The other countries are reforming
faster and deeper. The biggest drop has come in the
component called ‘Access to Sound Money’
where India’s rank has fallen from 84 to 104
capturing the worsening problem of inflation in the
country. The second biggest fall is in the area of
Regulation of Credit, Labour, Business where despite
the increase in rating from 5.81 in 2000 to 5.90 this
year, India’s rank has fallen from 66 to 99.
This demonstrates that other countries have deregulated
the credit, labour and business far more than India
has done. So there is a clear message in the report
for the Indian government to focus on improving monetary
policy and regulatory environment.
Economic Freedom of the World
International Rankings
In this year’s main index, Hong Kong retains
the highest rating for economic freedom, 8.94 out
of 10. The other top scorers are: Singapore (8.57),
New Zealand (8.28), Switzerland (8.2), the United
Kingdom (8.07), Chile (8.06), Canada (8.05), Australia
(8.04), the United States (8.04), and Ireland (7.92).
The rankings and scores of other large economies
are Germany, 17 (7.64); Taiwan, 18 (7.63), Japan,
27 (7.48); South Korea, 29 (7.42); Sweden, 33 (7.35);
France, 45 (7.19); Italy, 49 (7.15); Mexico, 58 (6.98);
India, 77 (6.59); China, 93 (6.29); Brazil, 96 (6.16);
and Russia, 101 (6.12).
Several countries have substantially increased their
ratings and become relatively free during the past
decade. Estonia increased its rating by 2.27 points
since 1995 and is now one of the freest economies
in the world. Lithuania and Latvia have increased
their ratings by at least two points since 1995 and
their 2006 ratings are greater than 7.0. The ratings
of Cyprus, Hungary, Kuwait, and South Korea have also
improved substantially and their ratings are now 7.3
or more. Two African economies, Zambia and Ghana,
have become substantially freer with ratings of 7.13
and 7.04, respectively.
However, African nations continue to occupy most of
the bottom spots on the index with the lowest levels
of economic freedom, joined by Venezuela and Myanmar.
The 10 nations with the lowest levels of economic
freedom are: Zimbabwe (2.67), Angola (4.10), Myanmar
(4.19), the Republic of Congo (4.64), Niger (4.67),
Venezuela (4.67), Guinea-Bissau (5.01), Central Africa
Republic (5.01), Chad (5.12), Rwanda (5.23), and Burundi
(5.23).
“Weakness in the rule of law and property rights
is particularly pronounced in sub-Saharan Africa,
among Islamic nations, and for many nations that were
part of the former Soviet bloc,” said James
Gwartney, lead author of the report and professor
of economics at Florida State University.
“Many Latin American and Southeast Asian nations
also score poorly for rule of law and property rights.
The nations that rank poorly in this category also
tend to score poorly in the trade and regulation categories,
even though several have reasonably sized governments
and sound money.”
Economic Freedom and World Poverty
The 2008 edition of the Economic Freedom of the World
report includes new research from Gwartney and Seth
W. Norton, professor of business at Wheaton College,
examining the role of economic freedom in eliminating
poverty with a particular focus on sub-Saharan Africa.
They point out that numerous studies have shown
that countries with more economic freedom grow more
rapidly and achieve higher per-capita income levels
than those that are less free; therefore, it would
seem that this growth should also help reduce poverty.
Gwartney and Norton note that since economic growth
is the driving force underlying reductions in poverty,
countries such as Chile, Peru, Thailand, Malaysia,
South Korea, China, and India have seen their poverty
rates decrease in recent decades because these countries
have achieved rapid economic growth.
“If a country adopts reforms supportive of
economic freedom, will the wellbeing of the poor improve?
Theory indicates that the answer to this question
is “yes,” but substantial reductions in
poverty are likely to take some time,” Norton
said.
“It will take time for the new policy direction
to acquire credibility, investors and other decision-makers
to respond to the more attractive environment, and
the rate of growth to increase. As the higher level
of economic freedom is sustained and the more rapid
growth persists, poverty rates will fall, and they
will fall by larger amounts with the passage of time.”
Economic Freedom of the World
The authors conclude that the institutions and policies
of most sub-Saharan African nations are highly inconsistent
with economic growth. The failure of the legal system
to protect property rights, the roadblocks imposed
by trade restrictions, and the heavy regulation and
administrative costs imposed on business undermine
economic growth because they stifle the gains from
trade, entrepreneurship, and investment. Given that
most of the sub-Saharan countries are relatively small,
the high trade barriers are particularly damaging.
In order to encourage economic growth in Africa,
Norton and Gwartney recommend that African nations
reduce and eliminate trade barriers and business regulations;
improve their legal system; and develop an interstate
highway system through Africa.
About the Economic Freedom Index
Economic Freedom of the World measures the degree
to which the policies and institutions of countries
are supportive of economic freedom. This year’s
publication ranks 141 nations representing 95% of
the world’s population for 2006, the most recent
year for which data are available. The report also
updates data in earlier reports in instances where
data have been revised. For more information on the
Economic Freedom Network, data sets, and previous
Economic Freedom of the World reports, visit
www.freetheworld.com
Centre for Civil Society (CCS)
CCS is an independent, non-profit, research and advocacy
organization devoted to improving the quality of life
for all citizens of India by reviving and reinvigorating
civil society. But we don't run primary schools, or
health clinics, or garbage collection programs. We
do it differently: we try to change people's ideas,
opinions, and mode of thinking by research, seminars,
and publications. We champion limited government,
rule of law, free trade, and individual rights. We
are a resource for innovative community and market
based ideas for critical public policy issues facing
India today, particularly in areas of education, livelihood,
governance and environment. By bringing these ideas
to current and future leaders, CCS is advancing opportunity
and prosperity for all Indians.
For further details: www.ccs.in
CCS is building awareness on the hurdles faced by
small entrepreneurs through innovative outreach programs
like JEEVIKA, the annual South Asia Livelihood Documentary
Festival that captures the livelihood challenges faced
by the rural and urban poor and brings it to the attention
of current and future policy makers thereby advocating
economic freedom in India.
For further details: www.jeevika.org
CONTACT:
K-36, Hauz Khas Enclave, New Delhi 110016 India
Phone: +91 11 2653-7456 / 2652-1882 Fax: +91 11 2651-2347
Email: parth@ccs.in/ baishali@ccs.in Mobile: +91 9899485667
/ 9871366407
Websites: www.ccs.in / www.schoolchoice.in / www.jeevika.org
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