India’s economic reforms are not enough to move towards prosperity
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The economic turmoil that India has been experiencing for some time would have been reversed by the current government. Chains of dismantling to implement new reforms are floating on the surface of Indian confidence. Ironically, despite demands and assured talks for reform, India has slipped to 108th place in the 165-country World Economic Freedom report. In the year 2021 report, the country was in 103rd position, but currently lags behind sister countries such as Bhutan, Sri Lanka and Nepal.
Economic freedom is inextricably linked with socio-political and economic improvement, better policies and standard of living. Countries with greater economic freedom tend to have a better standard of living than those without. They tend to have a higher gross domestic product per capita. Other factors that govern economic freedom include the size of government and regulation.
The Economic Freedom Index shows that the Indian government of the Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi is currently facing the biggest challenge of the cornerstones of the recognition of economic freedom. There is a serious violation of personal choice, voluntary exchange, the freedom to enter markets and competition, and the security of the person and of private property.
Incidentally, many South Asian countries fare better than India, in this year’s report, which compares 165 countries and territories. Hong Kong SAR of China is number one again, although China’s heavy hand will likely lower Hong Kong’s ranking in the coming years and Singapore remains at number two. India (108) is behind Taiwan (17), Japan (18), Korea (47), Kazakhstan (55), Malaysia (55), the Philippines (58), Mongolia (61), l ‘Indonesia (70), Thailand (89), Bhutan (92), Srilanka (94), Nepal (99) and Russia (100).
the World Economic Freedom Report published by the Fraser Institute, based in Canada, substitutes its measure of economic freedom, on five areas:
- The size of government and taxation,
- Private property and the rule of law,
- Access to healthy currency,
- The freedom to trade internationally and prices,
- Regulation of business, labor and capital markets.
Overall, in the five areas related to economic freedom, India has been ranked as follows:
- Ranked 49th with 7.39 points in size of government spending.
- The judiciary ranks 65th with 5.51 points for the protection of property rights.
- Ranked 109th with 7.87 points in Net Money.
- Ranked 135th with 5.84 points in the freedom of international trade.
- Declared classified 120 with 6.57 points in control.
According to the World Bank, the average gross domestic product (GDP) per capita in India was US $ 6,118.36 in 2020, adjusted by purchasing power parity (PPP). GDP per capita, in India, when adjusted by PPP is equivalent to 34 percent of the world average. According to Pew Research, income levels in India are estimated as the number of poor people with income of $ 2 (INR 150) per day or less in PPP, less in a day.
Studies, which cover two decades of the period, show that where economic freedom is greater, the rate of investment in the economy is higher and the rate of economic growth is higher. The increase in income and the decrease in poverty are visible. Likewise, in countries with free economies, political and legal systems are at the forefront of increasing the per capita income of these countries and economic growth.
However, the points obtained here have been swallowed up by the increased corruption in the country. In addition, systemic deficiencies hamper long-term economic growth. The deficit in the functioning of the judiciary and the legal system, in addition to the widespread corruption in the economy, has contributed to slowing down the active private sector.
The report said the budget deficit would only increase with extravagant government-dominated subsidy systems in many sectors. Although economic reforms in India are in full swing, the simplification of key services has come to a halt. However, despite some efforts, they are not enough to move the economy forward. This includes delays in authorizing multinational retailers to deliver goods to the public at low prices and the dominance of public sector entities. The Indian economy risks being further compromised by the pursuit of socialist policies. India’s growth rate has slowed down due to a lack of adequate measures for economic freedom and also effective measures to control corruption as a whole.
The rule of law in India as a whole is not the same. The judiciary finds weaknesses in the systematization of its independence. The judicial process remains long, costly and subject to political pressure. Other mistakes include free central government plans, failure to provide effective security for property rights, and poor protection of intellectual property rights.
About 230 years ago, Adam Smith rightly recognized that economic freedom and the prosperity it brings work for the benefit of the poor. It is not clear which route the Indian government is taking, which route to stick to its political planning or to take further steps to induce economic freedom.
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