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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