Economic Freedom of the States of India 2013

Bibek Debroy‚ Laveesh Bhandari‚ Swaminathan S. Anklesaria Aiyar

Economic freedom matters. It improves outcomes by empowering citizens with the freedom to choose. This report, one of a series starting in 2005, once again seeks to measure economic freedom in different Indian states, and to show how this improves economic outcomes.

Economic freedom is a concept first used by the Fraser Institute to measure the extent to which governments constrain efficient decision making and distort resource allocation. It has been used in cross-country literature to show that countries with higher levels of freedom have better development indicators. However, attempts to capture economic freedom at the sub-national level of state governments are rare, although very pertinent in a federal country like India. Many areas of economic decision making in India fall under the jurisdiction of state governments, and are listed in the Seventh Schedule of the Indian Constitution. Our pioneering work modifies the Fraser Institute’s methodology of measuring economic freedom across countries, creating a new way of measuring economic freedom across Indian states. This enables us to see which states are getting freer or less free, and to demonstrate how economic freedom at the state level impacts economic development.

Bibek Debroy is Professor, Centre for Policy Research, Delhi. He is an economist and has worked in academic institutes and for the government. His primary research interests are education, health, law, governance and trade. He is the author of several books, papers and popular articles.

Laveesh Bhandari, recipient of best thesis award by the EXIM Bank of India in 1996, and Hite Fellowship for work in International Finance. His areas of work are macro- economic research, large-frame surveys on economic and social sectors and consumer profiles, policy analysis, econometric modelling, monitoring and evaluation. His work on inequality, education and India’s progress is frequently referred to in the policy debate in India. He has authored and co-authored numerous publications on socioeconomic development, health, education, poverty and inequality.

Swaminathan S. Anklesaria Aiyar is a research fellow at the Cato Institute with a special focus on India and Asia. His research interests include economic change in developing countries, human rights and civil strife, political economy, energy, trade and industry. He is a prolific columnist and TV commentator in India, well-known for a popular weekly column titled “Swaminomics” in the Times of India. He is the author of Escape from the Benevolent Zookeepers: The Best of Swaminomics (New Delhi: Times of India, 2008) and has been called “India’s leading economic journalist” by Stephen Cohen of the Brookings Institution. He has been the editor of India’s two biggest financial dailies, The Economic Times and Financial Express, and was also the India correspondent of The Economist for two decades. He has frequently been a consultant to the World Bank and Asian Development Bank. Currently, he is consulting editor of The Economic Times. Swami spends part of the year in India and part in the USA. He holds a Master’s degree in economics from Oxford University, UK.