Economic freedom in 20 Indian states, Gujarat is No.1

Gujarat is India's top state in terms of economic freedom, according to 'Economic Freedom Rankings of the States of India 2012'.

The economic freedom Index is based on the three parameters - size of the government, legal structure and security of property rights, regulation of business and labour.

The report highlights the significant differences in economic governance that exist in India.

It has focused attention on state-level reforms to improve inclusive economic growth. India ranks only 111 among 144 countries in the EFW list, having slipped from 76th position in 2005.

Clearly, its government has attached a low priority to improving economic freedom, the report points out.

The levels of economic freedom from state to state within India varies, many states have shown significant increases and significant declines in their economic freedom rankings. Greater economic freedom is positively associated with growth at the state level, states the report.

Take a look at the states that score well in terms of economic freedom...

Gujarat (Rank 1)
Score: 0.64

The report states that Gujarat has left behind its sordid past of communal violence and destruction, while other states are unable to improve security of life and property in the manner required.

This puts a serious question mark on the sustainability of high economic growth in such states, says the 'Economic Freedom Rankings of the States' report.

Gujarat has shown a remarkable increase from 0.46 to 0.64, and has moved up from 5th position in 2005 to become India's top state in economic freedom today.The good news is that economic freedom in Indian states has improved even though it has slipped at the national level.

State capitals have been doing more to improve economic freedom than New Delhi. 

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Tamil Nadu (Rank 2)
Score: 0.57

Tamil Nadu has shown steady improvement in their index values and relative ranking - each has benefited from economic growth without commensurate increase in the size of their government.

Tamil Nadu has been a consistent performer – it was at the top in 2005 as well as 2009 but has declined to second 14 rank in 2011.

The report has been prepared by policy expert Bibek Debroy of the Centre for Policy Research, Laveesh Bhandari, Indicus Alaytics, Swaminathan S Anklesaria Aiyar, the Cato Institute and Ashok Gulati, Commission for Agricultural Costs and Prices, Government of India.

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Madhya Pradesh (Rank 3)
Score: 0.56

Madhya Pradesh is one of the best governed states and this is reflected in its index value, ahead of all others.

Better police investigations as well as a lower share of economic offenses to the total incidences of crime resulted in significant improvement in the state. 

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Haryana (Rank 4)
Score: 0.55

Haryana has been the most rapidly growing state in India. The state is attracting significant investments in the services sector and manufacturing.

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Himachal Pradesh (Rank 5)
Score: 0.52 

Himachal Pradesh scored on better performance on a range of variables - yearly market wages to minimum notified wages for unskilled workers, strikes and lock outs, and total cases registered in the prevention of corruption act improved. 

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Andhra Pradesh (Rank 6)
Score: 0.51

Andhra Pradesh ranks fifth in legal structure and security. Andhra Pradesh has slipped from 3rd to 6th position in rankings.

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Jammu & Kashmir (Rank 7)
Score: 0.46

Jammu & Kashmir is now among the best performers with relatively high economic growth. The index values of 2005 and 2009 show that the state was amongst the poorest performers.

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Rajasthan (Rank 8)
Score: 0.43 

Rajasthan's ratings show an improvement since 2005. The value of property recovered out of property stolen and decline in the proportion of violent crime are some of the factors leading to its improvement.

However, in the period 2009 to 2011, there has been a marginal decline in the state's rating. 

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Karnataka (Rank 9)
Score: 0.42

Karnataka has seen a moderate improvement in ratings.

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Kerala (Rank 10)
Score: 0.42

Kerala has seen significant decline in economic offence cases.

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Chhattisgarh (Rank 11)
Score: 0.41

Chhattisgarh scores high on legal structure and security of property rights and regulation of labour and business.

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Punjab (Rank 12)
Score: 0.39

Punjab's rank has slipped badly from 6th position in 2005 to 12th position in 2011. This does not reflect a major deterioration in its freedom rating, which has dipped just marginally from 0.41 to 0.39.

But it has failed to keep up with other states, many of whom have improved their freedom ratings dramatically, states the report.

However, Punjab's cities have created a relatively good business climate. Ludhiana, the biggest city in the state, is ranked by IFC/World Bank study as one cities with the best business climate among major Indian cities.

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Maharashtra (Rank 13)

Score: 0.39

Maharashtra is another state that is among the better performers. The size of the government has not increased as much as economic growth in recent years.

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Uttaranchal (Rank 14)
Score: 0.38

Uttaranchal has seen a moderate improvement (0 to 0.08 points). But the states that have performed better have seen improvements on a whole range of indicators.

This suggests that improvements in economic freedom can be most dramatic when they are comprehensive and not driven by excellent performance in just one or two areas.

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Assam (Rank 15)
Score: 0.36

Assam's index values and rankings show that there has been significant improvement but here as well, the data shows many year-on-year variations – largely due to an economy that is highly dependent upon agriculture.

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Uttar Pradesh (Rank 16)
Score: 0.35

Uttar Pradesh had a low ranking in 2005 (at 19) and has improved upon it in 2009.

One of the factors behind this is better performance in the variable registration of cases under prevention of corruption. However, in 2011 there had been a reversal in the performance of the state.

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Orissa (Rank 17)

Score: 0.34

Overall, Orissa has had a significant fall in their economic freedom ratings.

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West Bengal (Rank 18)

Score: 0.32

As many as 8 states have seen a fall in their economic freedom rankings since 2005. West Bengal is among the worst performers in 2011.

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Jharkhand (Rank 19)
Score: 0.31

Jharkhand is among the worst performers, with its score falling from 0.40 to 0.31.

The declining index values and relative ranking of Jharkhand in this area only confirm the much stated worsening condition in recent years.

Its human development indicators are among the poorest in the country.

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Bihar (Rank 20)

Score: 0.29

Bihar have shown steady improvement in their index values and relative ranking- each has benefited from economic growth without commensurate increase in the size of their government.

Bihar has improved significantly from 0.25 to 0.29, but remains at the last position.