2017 Index of Economic Freedom

India

overall score52.6
world rank143
Rule of Law

Property Rights55.4

Government Integrity44.3

Judicial Effectiveness44.4

Government Size

Government Spending77.4

Tax Burden77.2

Fiscal Health11.0

Regulatory Efficiency

Business Freedom52.8

Labor Freedom41.6

Monetary Freedom75.0

Open Markets

Trade Freedom72.6

Investment Freedom40.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 1.3 billion
  • GDP (PPP):
    • $8.0 trillion
    • 7.3% growth
    • 6.7% 5-year compound annual growth
    • $6,162 per capita
  • Unemployment:
    • 3.5%
  • Inflation (CPI):
    • 4.9%
  • FDI Inflow:
    • $44.2 billion
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India is a significant force in world trade. Corruption, underdeveloped infrastructure, and poor management of public finance continue to undermine overall development, although the economy has sustained an average annual growth rate of about 7 percent over the past five years.

Growth is not deeply rooted in policies that preserve economic freedom. Progress on market-oriented reforms has been uneven. The state maintains an extensive presence in many areas through public-sector enterprises. A restrictive and burdensome regulatory environment discourages the entrepreneurship that could provide broader private-sector growth.

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Background

India is a stable democracy. It is 80 percent Hindu but also home to one of the world’s largest Muslim populations. Prime Minister Narendra Modi, leader of the Bharatiya Janata Party, took office in 2014 and is credited with reinvigorating India’s foreign policy. Modi, who in June 2016 made his fourth visit to the United States in two years, has bolstered ties with the U.S., particularly in defense cooperation. India has technology and manufacturing sectors as advanced as any in the world as well as traditional sectors characteristic of a lesser developed economy. Extreme wealth and poverty coexist as the nation both modernizes rapidly and struggles to find paths to inclusive development for its large and diverse population.

Rule of LawView Methodology

Property Rights 55.4 Create a Graph using this measurement

Government Integrity 44.3 Create a Graph using this measurement

Judicial Effectiveness 44.4 Create a Graph using this measurement

Real property rights are generally well enforced in metropolitan areas, although titling remains unclear in many other urban and rural areas. The judiciary is independent, but courts are understaffed and lack the technology necessary to clear an enormous backlog. Domestic and international pressure led to passage of legislation aimed at addressing corruption, but there is little evidence that it is being implemented effectively.

Government SizeView Methodology

The top individual income tax rate is 30.9 percent (including an education tax). The top corporate tax rate is 34.6 percent. The overall tax burden equals 16.6 percent of total domestic income. Government spending has amounted to 27.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 7.3 percent of GDP. Public debt is equivalent to 67.2 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory framework is burdensome, and the legal framework is weak. Labor regulations continue to evolve, and the informal economy is an important source of employment. Although the IMF reported in 2016 that India’s “major subsidies” (e.g., on fuels and fertilizer) dropped below 2 percent of GDP, the government is introducing a new basic foods subsidy for around two-thirds of the population.

Open MarketsView Methodology

Trade is moderately important to India’s economy; the value of exports and imports taken together equals 49 percent of GDP. The average applied tariff rate is 6.2 percent. Foreign investment is screened, but ownership restrictions in some economic sectors have been reduced. State-owned enterprises distort the economy. Despite some liberalization and modernization, state-owned institutions dominate the banking sector and capital markets.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong89.81.2
2Singapore88.60.8
3New Zealand83.72.1
4Australia810.7
5Taiwan76.51.8
6South Korea74.32.6
7Malaysia 73.82.3
8Macau70.70.6
9Brunei Darussalam69.82.5
10Japan69.6-3.5
11Kazakhstan695.4
12Vanuatu67.46.6
13Thailand 66.22.3
14Philippines65.62.5
15Azerbaijan63.63.4
16Fiji63.44.6
17Tonga633.4
18Indonesia61.92.5
19Kyrgyz Republic 61.11.5
20Cambodia59.51.6
21Bhutan58.4-1.1
22Samoa58.4-5.1
23Tajikistan58.26.9
24China57.45.4
25Sri Lanka57.4-2.5
26Nepal55.14.2
27Solomon Islands558.0
28Bangladesh 551.7
29Mongolia54.8-4.6
30Micronesia54.12.3
31Laos544.2
32Pakistan 52.8-3.1
33India52.6-3.6
34Burma52.53.8
35Vietnam52.4-1.6
36Uzbekistan52.36.3
37Papua New Guinea50.9-2.3
38Kiribati50.94.7
39Maldives50.3-3.6
40Afghanistan48.9N/A
41Turkmenistan47.45.5
42Timor-Leste46.30.5
43North Korea4.92.6
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