Work for Modi: India still trails Pak in business freedom index

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By Jagdeep Worah
29 January 2015

Many Indians might like to think of neighbouring Pakistan as a basket case economy surviving on US aid; but it is easier to do business there than in India, according to a Washington-based think-tank.

With an economic freedom score of 54.6 out of 100, India has been ranked the 128th-freest economy in the 2015 Index of Economic Freedom published by The Heritage Foundation, evaluating economic conditions and government policies in 186 countries. Pakistan ranks higher at 121.

There is still much work ahead for Prime Minister Narendra Modi to maintain his reformist agenda. In the Asia-Pacific region alone, the annual report compiled in collaboration with The Wall Street Journal ranks India a mere 26th out of 41 countries.

India's total score is down by 1.1 points from last year, with modest improvements in business freedom, property rights, and reduced corruption offset by declines in labour freedom and trade freedom. But its overall score continues to be below the regional and world averages, the Index notes while saying that India remains a "mostly unfree" economy.

India's level of economic freedom is unchanged over five years, the report notes. The government's presence in the economy remains extensive through state-owned enterprises and wasteful subsidy programmes that cause chronically high budget deficits.

"In the absence of a well-functioning legal and regulatory framework, a weak rule of law exacerbated by corruption in many areas of economic activity undermines the emergence of a more vibrant private sector," the report said.

It did add that the administration under Modi "has undertaken some necessary structural adjustments with a focus on reforming the inefficient and bloated government sector, better managing public finance, and improving the business and investment environments".

However, the first budget of the new government presented in July 2014 was short on detail about plans to restructure wasteful subsidy programmes and reignite economic growth.

Corruption, poor infrastructure, and fiscal deficits are major obstacles to economic growth, the report said.

India is a significant force in world trade, but its economy continues to operate far below its potential. In a poll, 96 per cent of Indians said chronic corruption was holding back their country.

According to the Index, the US continues to be the 12th-freest economy, seemingly stuck in the ranks of the "mostly free," trailing Australia, New Zealand and Switzerland.

The global average economic freedom score has advanced to its highest level ever of 60.4 (on a 0-to-100 scale) in the 2015 Index.

Although Hong Kong has maintained its status as the world's freest economy, a distinction that it has achieved for 21 consecutive years, the gap between that Chinese territory and Singapore, the second-freest economy, has further vanished, it noted.





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