Economic Freedom of the States of India 2013

Economic freedom matters. It improves outcomes by empowering citizens with the freedom to choose. This report, one of a series starting in 2005, once again seeks to measure economic freedom in different Indian states, and to show how this improves economic outcomes. Economic freedom is a concept first used by the Fraser Institute to measure the extent to which governments constrain efficient decision making and distort resource allocation. It has been used in cross-country literature to show that countries with higher levels of freedom have better development indicators. However, attempts to capture economic freedom at the sub-national level of state governments are rare, although very pertinent in a federal country like India. Many areas of economic decision making in India fall under the jurisdiction of state governments, and are listed in the Seventh Schedule of the Indian Constitution. Our pioneering work modifies the Fraser Institutes methodology of measuring economic freedom across countries, creating a new way of measuring economic freedom across Indian states. This enables us to see which states are getting freer or less free, and to demonstrate how economic freedom at the state level impacts economic development.