In the Global Economic Freedom Index 2020, India has fallen to the 105th position from last year’s ranking of 79th, as per the report released by Fraser Institute in Canada on Thursday. Hong Kong has again topped the charts, followed by Singapore, New Zealand, Switzerland, Australia, the United States, Mauritius, Georgia, Canada, and Ireland.
What does the report mean?
The report is published in India by Fraser Institute in Canada in collaboration with the New Delhi-based think tank Centre for Civil Society. The report measures how free the policies and institutions of the country are to conduct business. People living in countries with high economic freedom have more civil and political liberties, enjoy great prosperity, and even tend to have longer lives. Some deciding factors of economic freedom are freedom to enter markets and compete, the security of individuals and private companies, voluntary exchange, and personal choice. Globally India ranks 105th position in a collective report of all such factors.
Significance of the data today
The report of 2020 is based on data from 2018 as the latest year of comparable statistics. All the indicators like internal regulation, size of the government, property rights, freedom to trade internationally, government spending, and taxation are all based on the 2018 policies of 162 participating countries and territories. Centre for Civil Society President Partha J Shah said, “Since the ranking is based on 2018 data, many new restrictions on international trade, tightening of the credit market due to NPAs, and COVID-19’s impact on debt and deficits are not reflected in India’s score.” However, India has noted a marginal decrease in several parameters like regulation of credit, labor, and business (from 6.63 to 6.53), government size (8.22 to 7.16), legal system and property rights (5.17 to 5.06), and freedom to trade internationally (6.08 to 5.71). A score closer to 10 indicates a higher level of economic freedom.
Performance of other major countries
The bright spot here is that China is positioned at 124th in the latest global economic freedom index, far lower than India. Other notable rankings are Japan (20), Germany (21), Italy (51), France (58), Mexico (68), Russia (89), and Brazil (105). Meanwhile, the lowest-ranked countries in the list are the African Republic, Democratic Republic of Congo, Zimbabwe, Republic of Congo, Algeria, Iran, Angola, Libya, Sudan, and Venezuela.
Points suggested by The Policy Times
- It is notable that this is based on 2018 data and since then India has banned a lot of foreign trade in the country, which will reflect negatively in the future economic index.
- The economic index determines the freedom other businesses enjoy in the country and a poor ranking does not directly mean lower economic performance.
- However, with the recent contraction in the GDP by 23.9%, India has to open its doors to foreign investments and businesses so that the economy can mutually grow.