India's ranking in economic freedom tumbled to 105th among 162 countries in 2018 from 79th the previous year. It should be noted that this drop cannot be attributed to the Covid-19 crisis, whose impact would become evident only two years later.
A major disappointment for India came on the parameter of "freedom to trade internationally", on which India ranked 139th, compared with 137th in 2017, showed the ‘Economic Freedom of the World’ report — it measures how policies and institutions of countries support economic freedom — released today by Centre for Civil Society and Canada’s Fraser Institute.
Another key disappointment was India's ranking on "regulation", where it stood 122nd in 2018, against 114th a year earlier.
However, the country gained one place to 88th on "sound money" in the latest report, against 89 in the previous one. It retained its position at 79th on "legal systems and property rights". On the size of the government, a major claim of the Narendra Modi government, the country's ranking declined to 54th in 2018 from 36th the previous year.
India reported a fall in each component of economic freedom. While a score closer to 10 indicates a higher level of economic freedom, the country’s score fell on each — to 7.16 from 8.22 the previous year on the size of the government, to 5.07 from 5.17 on legal system and property rights, to 8.34 from 8.37 on sound money, to 5.71 from 6.08 on freedom to trade internationally, and to 6.53 from 6.69 on regulation of credit, labour and business.
Parth J Shah, president of the Centre for Civil Society, said: "The Centre and state governments have initiated business process re-engineering to simplify business registration and compliances. No doubt that some of these efforts have had a bearing on India's score.”
He said since the ranking was based on 2018 data, many of the new restrictions on international trade, besides tightening of the credit market due to NPAs and the Covid impact on debt and deficits were not reflected in India’s score.
The government still continues to play an overbearing role in many areas of economic life. The prospects for increasing economic freedom in India depend on next-generation reforms in factor markets and in greater openness to international trade, he said.