Index of Economic Freedom
The Index of Economic Freedom is an annual index and ranking created in 1995 by The Heritage Foundation and The Wall Street Journal to measure the degree of economic freedom in the world's nations. The creators of the index took an approach similar to Adam Smith's in The Wealth of Nations, that "basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society".
The Index's definition of economic freedom is "the highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself
The Index comprises of twelve aspects divided into four categories:
- Rule of Law - Property rights, judicial effectiveness, government integrity
- Government size - Tax burden, Fiscal health, government spending
- Regulatory Efficiency - Business freedom, labor freedom, monetary freedom
- Market Openness - Trade freedom, investment freedom, financial freedom
In assessing conditions in these four categories, the Index measures 12 specific components of economic freedom, each of which is graded on a scale from 0 to 100. Scores on these 12 components of economic freedom, which are calculated from a number of sub-variables, are equally weighted and averaged to produce an overall economic freedom score for each economy.
The Index of Economic Freedom is an annual index and ranking created in 1995 by The Heritage Foundation and The Wall Street Journal to measure the degree of economic freedom in the world's nations. The creators of the index took an approach similar to Adam Smith's in The Wealth of Nations, that "basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society".
The Index's definition of economic freedom is "the highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself
The Index comprises of twelve aspects divided into four categories:
- Rule of Law - Property rights, judicial effectiveness, government integrity
- Government size - Tax burden, Fiscal health, government spending
- Regulatory Efficiency - Business freedom, labor freedom, monetary freedom
- Market Openness - Trade freedom, investment freedom, financial freedom
In assessing conditions in these four categories, the Index measures 12 specific components of economic freedom, each of which is graded on a scale from 0 to 100. Scores on these 12 components of economic freedom, which are calculated from a number of sub-variables, are equally weighted and averaged to produce an overall economic freedom score for each economy.
SUBJECT Variables
OVERALL PERFORMANCE
- India is currently classified as "Mostly Unfree" for the level of economic freedom enjoyed by its residents.
- India got an overall score of 52.9 on a scale of 100 on the Index of Economic Freedom 2023 - equating to a 52.9% achievement on the index. India's overall score on the 2023 Index is at a 6-year low.
- India is currently ranked 131st amongst 184 countries on the Index.
- India continues to lag behind in the areas of government integrity, labour freedom, and fiscal health which heavily weighs upon its overall score and ranking on the Index.
RULE OF LAW
Rule of Law is one of the four components that comprise the Index of Economic Freedom. It consists of 3 aspects, the scores of which are equally weighted and averaged to produce an overall economic freedom score for each economy.
- Property rights assesses the extent to which a country’s legal framework allows individuals to acquire, hold, and utilize private property, secured by clear laws that the government enforces effectively. It also assesses the level of state expropriation of private property. The score for this component is derived by averaging scores for five sub-factors - physical property rights, intellectual property rights, strength of investor protection, risk of expropriation, and quality of land administration.
- The score for the judicial effectiveness component is derived by averaging scores for three sub-factors - judicial independence, quality of the judicial process, and favoritism in obtaining judicial decisions.
- The score for government integrity is derived by averaging scores for five sub-factors - irregular payments and bribes, transparency of government policymaking, absence of corruption, perceptions of corruption, and governmental and civil service transparency.
Property Rights: In 2023, India scored 49.7 on a scale of 100 - equating to a 49.7% achievement level on the scale. India's score for Property Rights on the 2023 Index is at its lowest level since 2010.
Judicial Effectiveness: In 2023, India scored 53 on a scale of 100 - equating to a 53% achievement level on the scale.
Government Integrity: In 2023, India scored 42.2 on a scale of 100 - equating to a 42.2% achievement level on the scale. India's score for Government Integrity on the 2023 Index is at its lowest level since 2017.
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