Economic Freedom of the States of India 2011 - Cato Institute

Institute's Economic Freedom of the World report, with adjustments for data relevant to .... Andhra Pradesh reduced waste and corruption and implemented innovative reforms .... The scores drive the ranks and are more indicative of inter-temporal improvements. ..... perceptions but on hard facts such that it is not sensitive to.
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Contents

List of Tables and Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Foreword by I AN V ÁSQUEZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Message by S IEGFRIED H ERZOG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1. The State of Economic Freedom in India Bibek Debroy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2. Calculating Economic Freedom Laveesh Bhandari. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3. Andhra Pradesh: Fastest Improver in Economic Freedom Swaminathan S. Anklesaria Aiyar. . . . . . . . . . . . . . . . . . . . . . . . 41 Appendices I: Variables and Methodology . . . . . . . . . . . . . . . . . . . . 65 II: Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . 68 III: Mapping of Variables with Economic Freedom of the World . . . . . . . . . . . . . . . . 70 IV: Data and Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

List of Tables and Figures

TABLES 1.1

India’s Scores in Economic Freedom of the World . . . . . . . . . . . . . . . . . 17

2.1

Areas under Central and State Government Control . . . . . . . . . . . . . . . . 24

2.2

Size of Government: State Ratings and Rankings . . . . . . . . . . . . . . . . . 28

2.3

Legal Structure and Security: State Ratings and Rankings . . . . . . . . . . . 31

2.4

Regulation of Labour and Business: State Ratings and Rankings . . . . . . 34

2.5

Overall Economic Freedom Ratings: 2009 . . . . . . . . . . . . . . . . . . . . . . . 36

2.6

Economic Growth and Economic Freedom in Indian States . . . . . . . . . . . 37

3.1

Ranking of States on Economic Freedom Index . . . . . . . . . . . . . . . . . . 42

3.2

GDP Growth in Andhra Pradesh and All-India . . . . . . . . . . . . . . . . . . . . 43

3.3

Andhra Pradesh: Indicators of Economic Freedom—2005 and 2009 . . . . 44

3.4

Gross Fixed Capital Formation as Per cent of GDP/GSDP . . . . . . . . . . . . 47

3.5

GDP Growth in Four Northern Maoist-Affected Districts . . . . . . . . . . . . . 49

3.6

Sectoral Growth Rates at Constant (1999-2000) Prices: India vs. Andhra Pradesh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

3.7

The Top 10 Global Reformers and South Asia . . . . . . . . . . . . . . . . . . . . 54

3.8

Doing Business Rankings of Countries in South Asia . . . . . . . . . . . . . . . 55

3.9

Doing Business in India: Where is it Easiest? . . . . . . . . . . . . . . . . . . . . 55

3.10

Ease of Starting Businesses and Construction Permits . . . . . . . . . . . . . . 57

3.11

Property Registration and Ease of Export/Import . . . . . . . . . . . . . . . . . 58

3.12

Contract Enforcement and Tax Payments . . . . . . . . . . . . . . . . . . . . . . . 59

3.13

Ease of Closing Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

3.14

Economic Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

3.15

Ranking of States by Labour Ecosystem . . . . . . . . . . . . . . . . . . . . . . . . 63

8

Economic Freedom of the States of India

FIGURES 2.1

Change in EF Index and Economic Growth of the States (2005 to 2009) . . . . . . .