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India 104th in world's Free Economy list

As per a study by US-based Heritage Foundation, India comes in the "mostly unfree" category with a 55.6 per cent free economy in a scale of 100.

india Updated: Jan 17, 2007 03:19 IST

India on Tuesday improved its ranking in the latest index of world's Free Economy published by the Heritage Foundation, coming up from rank 121 last year to 104 this year. Pakistan was ranked 89.

According to the assessment put out by the Washington-based think tank and the Wall Street Journal, India came in the "mostly unfree" category with a 55.6 per cent free economy in a scale of 100, preceded by Tanzania (56.4). The evaluation was done for 157 economies in the world.

The study revealed that India enhanced its performance by 3.3 per centage points compared to last year. However, India's score is lower than the regional average and it is ranked 19th out of 30 countries in the Asia Pacific region.

Pakistan came at 89 with an overall per centage of 58.2 while China was ranked 119 with 61.6 per cent. Hong Kong topped the chart with 89.3 per cent.

The Heritage Foundation took into account 10 broad factors of freedom.

India collected 49.6 per cent in the business freedom section with factors like "extensive federal and state regulation as well as an infamously slow bureaucracy affecting it."

India notched up 51.2 per cent in trade freedom where an additional 20 per cent is deduced for extensive non-tariff barriers.

Non-tariff barriers included among other things excessive bureaucracy, restrictive licensing needs, export subsidies, import taxes and problematic enforcement of intellectual property rights.

A per centage of 84.8 fiscal freedom was accumulated by India with its tax rates being "moderate" while the freedom from government was put at 89 per cent.

The Indian inflation rate was "moderate" as well given its relatively unstable prices. The investment freedom in India was put at 40 per cent with the "highly complex rules and laws" in place.

Although India is the largest financial system in South Asia, there is a heavy government involvement with 27 state-owned banks controlling about 70 per cent of banking loans and deposits, the report added.

The foundation pointed out different areas where India needs to work upon extensively to become itself more business friendly.

"India could improve in several areas, including business freedom, trade freedom, financial freedom, investment freedom, and freedom from corruption," it said.

Highlighting factors hindering the growth of Indian economy, the report observed: "Foreign investment is overly regulated, and the judicial system is erratic and clogged by a significant backlog of cases. Though the country has a large financial sector, the government interferes extensively with foreign capital."