NCPA - National Center for Policy Analysis

Economic Freedom in India

March 25, 2011

While economic freedom can only be 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 percent annual state gross domestic product (GDP) growth.
  • States with a moderate rise in economic freedom averaged 8.1 percent annual growth.
  • States with a moderate fall in freedom averaged 8.7 percent annual growth.
  • And those with large falls in freedom averaged only 6.7 percent.

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 labor.

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

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