Tamil Nadu retains top slot in economic freedom ranking

The Dravida Munnetra Kazhagam (DMK) may be hogging headlines for giving headaches to the United Progressive Alliance (UPA) government at the Centre, but when it comes to governing Tamil Nadu, DMK scored highest so far as economic freedom is concerned.

Tamil Nadu retained the top slot in a ranking of 20 states from 2005 to 2009.

The Narendra Modi-led government may be accused of many counts on political freedom, but Gujarat progressed from 5th position in 2005 to 2nd in 2009.

After YSR Reddy’s death, Andhra Pradesh might take time to see emergence of an equally tall leader and the political landscape there may have been marred by the movement for Telangana. However, the state moved fastest in the ranking of the Economic Freedom of the States of India over the period under review. The state occupied third position in 2009 against seventh in 2005.

Its index score went up from 0.40 to 0.51 on a scale from 0 to 1, an improvement of 27.75 per cent.

However, Andhra Pradesh’s ranking in the index next time may be interesting to watch since Reddy died in September 2009, leaving only a quarter of the year for the successor.

Maharashtra, known as the financial capital of the country, is still the laggard so far as the index, developed on the lines of the Fraser Institute’s Economic Freedom of the World report, is concerned. The state further slipped to 11th position from ninth in 2005.

Its record is quite dismal, when seen in the context that once there were efforts to develop Mumbai as an international financial centre.

The states that dropped in rankings are Madhya Pradesh, Orissa, Uttarakhand, Punjab and Himachal Pradesh.

Punjab, once among the best performers, fell from sixth position in 2005 to 12th position in 2009. The report is prepared by noted economist Bibek Debroy, Laveesh Bhandari of research firm Indicus Analyctis and columnist Swaminathan S Anklesaria Aiyar. It said Punjab had been riding too long on its earlier successes, and its present track record on governance, broadly defined, was anything but satisfactory.

Kerala, Bihar, Jharkhand, Karnataka, Uttar Pradesh, Assam and Chhattisgarh showed moderate declines in economic freedom.

The index is based on three areas — size of government, legal structure and security of property rights, regulation of labour and business.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said, “We should not only look at economic freedom but negative freedom and also positive freedom. Lot of times, low taxes are considered to be as a big measure of economic freedom of doing business but it should also be remembered that it will lead to the state withering away, which is not an ideal situation. Notion of economic freedom is important; there is danger that when there is not enough data, the end analysis becomes convoluted.”

As regards size of government, the top three states in 2009 are Gujarat, Jharkhand and Haryana. The bottom three are Uttarakhand, Chhattisgarh and Uttar Pradesh, in reverse order. Jharkhand may seem to be a bit of a surprise, but the point is that the state witnessed high economic growth without a concomitant increase in the size of the government.

In legal structure and security of property rights, the top three states in 2009 are Tamil Nadu, Madhya Pradesh and Andhra Pradesh and the bottom three are Bihar, West Bengal and Assam.