2014 Index of Economic Freedom

India

overall score55.7
world rank120
Rule of Law

Property Rights50.0

Freedom From Corruption31.5

Limited Government

Government Spending77.8

Fiscal Freedom79.4

Regulatory Efficiency

Business Freedom37.7

Labor Freedom74.0

Monetary Freedom65.5

Open Markets

Trade Freedom65.6

Investment Freedom35.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 1.2 billion
  • GDP (PPP):
    • $4.7 trillion
    • 4.0% growth
    • 6.8% 5-year compound annual growth
    • $3,830 per capita
  • Unemployment:
    • 8.5%
  • Inflation (CPI):
    • 9.3%
  • FDI Inflow:
    • $25.5 billion
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Background

India is a relatively stable democracy, but its size and diversity (more than 80 percent of its population is Hindu, but its Muslim population is one of the world’s largest) are challenges to effective governance. A Maoist insurgency still plagues central and eastern India, as evidenced by an attack on Congress Party workers in late May 2013. Prime Minister Manmohan Singh’s government has been undermined by corruption scandals and a faltering economy, with growth at a 10-year low. The ruling Congress Party is focusing on populist policies to shore up votes for parliamentary elections in 2014 and has avoided the implementation of much-needed economic reforms. India is a significant force in world trade, but its economy continues to operate far below its potential.

Rule of LawView Methodology

Property Rights 50.0 Create a Graph using this measurement

Freedom From Corruption 31.5 Create a Graph using this measurement

Recent anti-corruption legislation was spurred by domestic and international pressure to counter the effects of graft on government efficiency and economic performance. The judiciary is independent of the executive branch, but judicial procedures tend to be protracted, costly, and subject to political pressure. Enforcement of intellectual property rights protection laws is weak, and piracy of copyrighted materials is widespread.

Limited GovernmentView Methodology

The top individual income tax rate is 30.9 percent, which includes an additional 3 percent levy for education. The top corporate tax rate is 32.4 percent, although domestic corporations pay only 30 percent. Surcharges push the effective rates higher. Other taxes include a value-added tax (VAT). The overall tax burden is 7 percent of GDP. Government expenditures are 27 percent of gross domestic output, and public debt is about 67 percent of GDP.

Regulatory EfficiencyView Methodology

Progress in improving the entrepreneurial environment has been only modest. Launching a business takes more than 25 days on average, and licensing requirements cost almost 10 times the level of average annual income. The labor market lacks flexibility, and its complex regulations hinder dynamic job growth. In September 2012, the government reduced fuel subsidies and raised rail fares for the first time in a decade.

Open MarketsView Methodology

India’s average tariff rate is 7.2 percent, and non-tariff barriers, including tariff-rate quotas on corn and dairy imports, significantly impede trade. There are many bureaucratic barriers to foreign investment. The financial system remains subject to government interference, and the state retains considerable ownership in the banking sector. All domestic banks are required to do priority-sector lending as directed by the government.

Country's Score Over Time

Bar Graph of India Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing India to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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