INDIA RATED 6.45
FOR ECONOMIC FREEDOM
BUT LIKELY TO DROP AS GOVERNMENTS RESPOND TO GLOBAL RECESSION
September 14, 2009
For Immediate Release
NEW DELHI, INDIA - INDIA ranked 86, in the
Economic Freedom of the World: 2009 Annual Report,
released today by CENTRE FOR CIVIL SOCIETY (CCS)
Last year India ranked 77.
“‘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.
This year’s report also includes new research that
examines the likely impact of the global recession on levels
of economic freedom. It suggests that economic freedom may
decline in the short term in response to crises, but over
a longer time, economic freedom has a tendency to increase
after a banking crisis.
“Economic freedom is vitally important to building
prosperity and reducing poverty so the finding that it may
increase in the long run following a financial crisis is good
news,” 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 Myanmar, Angola, and Venezuela. The
2009 report is based on data from 2007, the most recent year
for which comprehensive data available.
The annual peer-reviewed Economic Freedom of the World report
is produced by the Fraser Institute, Canada’s leading
economic think tank, in cooperation with independent institutes
in 75 nations and territories.
The Economic Freedom of the World report 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 the
global recession on levels of economic freedom.
“Economic freedom is the key building block 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 government: changed to 6.98 from 7.14 in the
last year’s report
- Legal structures and security of property rights: changed
to 5.94 from 6.12
- Access to sound money: changed to 6.71 from 6.7
- Freedom to trade internationally: changed to 6.67 from
6.82
- Regulation of credit, labour and business: changed to
5.95 from 6.17
International Rankings
In this year’s main index, Hong Kong retains the highest
rating for economic freedom, 8.97 out of 10. The other top
scorers are: Singapore (8.66), New Zealand (8.30), Switzerland
(8.19), Chile (8.14), United States (8.06), Ireland (7.98),
Canada (7.91), Australia tied with the United Kingdom (7.89),
and Estonia (7.81).
The rankings and scores of other large economies include
Taiwan, tied for 16th with Finland and Mauritius (7.62); (Germany,
27 (7.50); Japan, 28 (7.46); South Korea, 32 (7.45); France
33 (7.43); Spain, 39 (7.32); Sweden, 40 (7.28); Italy, 61
(6.95); Mexico, 68 (6.85); Israel, 78 (6.69), China, 82 (6.54),
Russia, 83 (6.50), India, 86 (6.45); Argentina, 105 (6.10),
and Brazil, 111 (6.00).
Several countries have substantially increased their ratings
and improved their relative levels of economic freedom during
the past decade. Estonia has increased by nearly 2.0 since
1995 and it is now one of the freest economies in the world,
ranking 11th overall. Lithuania and Latvia have increased
their ratings by similar magnitudes since 1995 and their 2007
ratings are now greater than 7.0. The ratings of Cyprus, Hungary,
Kuwait, and Korea have also improved substantially and their
ratings are now 7.25 or more. Two African economies, Ghana
and Zambia, have become substantially freer with ratings of
6.97 and 7.16, respectively.
But not all of the news is good. Economic freedom is regressing
in several other countries. The rating of Zimbabwe has fallen
by 3.18 while Argentina has declined by 0.80 since 1995. During
the same period, the ratings for Malaysia and the Philippines
have also fallen. Since 2000, the rating of Venezuela has
declined by more than 1.5, down to 4.07. During the same period,
Nepal’s rating dropped to 5.18 from 5.62. The United
States has also declined by almost seven-tenths of a point
to 7.88 from 8.55 in 2000, which has sent the accompanying
ranking down to 7th from 2nd in 2000.
Economic Freedom and the Global Recession
The 2008 edition of the Economic Freedom of the World report
includes new research that examines the likely impact of the
global recession on levels of economic freedom.
The study looked at banking crises that took place in Norway
and Sweden during the 1990s and found that although economic
freedom may decline in the short term in response to crises,
over a longer time, economic freedom has a tendency to increase
after a banking crisis. In the case of Norway and Sweden,
the banking crisis did not distract these countries from continuing
with their market-based reform policies.
“Even though a banking crisis can be very painful,
it is an illusion that they can be fully ruled out by better
government regulation. In fact, a case can be made that perverse
regulation in combination with the creation of too much liquidity
played a key role in the creation of the current crisis,”
said Fred McMahon, director of the Centre for Globalization
Studies at the Fraser Institute.
“The short-term response of governments will almost
surely reduce economic freedom but history shows that this
need not be the case over the long term. Several countries
that have experienced financial crises have moved toward greater
economic freedom in subsequent years. The impact on economic
freedom depends on what we learn from the crisis. Will we
move toward institutions and policies more consistent with
economic freedom? Or will we politicize, micromanage, and
expand the size and role of government? If we choose to follow
the latter route, our destiny will be like the generation
of 1930; we will face a lost decade of stagnation and decline.”
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 2008, 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
The full report is available at: http://www.freetheworld.com/release.html
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
/ www.azadi.me
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