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Saturday, November 12, 2005

India : TamilNadu Stands Top On Economic Freedom

Several western organisation executives always wonder what would be the best place to set up business in India. Many think Bangalore is the place to be in.I have repeatedly said that Indian Offshoring Is Not Just Bangalore alone. Several people hype bangalore - its time an objective assessment of its attractiveness comes out. With simmering controversies coupled with massive problems of infrastructure and stable manpower availability have set many corproates thinking.
Bibek Debroy & Laveesh Bhandari publish the results of the exercise of ranking Indian States on economic freedom. Economic freedom is about personal choice, voluntary exchange, freedom to compete, protection of person and property and availability of legal and monetary arrangements that not only protect property rights of owners, but also ensure enforcement of contracts. The rankings are based on officially published government data and therefore cover only twenty of the thirty five states ( a cursory glance shows that these states would anyway be far behind anycase).

Broadly, there are three heads for measuring economic freedom - size of government (revenue expenditure, administrative component in state domestic product, power subsidy, government share in organised employment, taxes, stamp duties, divestment); legal structure and security of property rights (stolen property recovered, violent crimes, economic crimes, vacant judiciary posts, completion of investigations by police, completion of trials by courts); and regulation of credit, labour and business (minimum wages, man-days lost in strikes and lockouts, share of unorganised labour force, number of SEZs, license fees for traders, market fees, implementation of Industrial Entrepreneurs' Memorandum, power shortages, pendency of cases and persons arrested under corruption-related laws). All variables are naturally normalised

Tamil Nadu tops the list and Assam is at the bottom. The scores show that Tamil Nadu is at the top by a significant magnitude and Assam (at the bottom) is also a fair distance away from Uttaranchal. For comparisons, the table also reproduces the 2004 ranks and scores. One notices significant improvements in Tamil Nadu, Madhya Pradesh, Jharkhand, Uttar Pradesh, Karnataka and West Bengal and significant deterioration in Maharashtra, Rajasthan, Jammu and Kashmir, Orissa and Chhattisgarh. Things to flag not only the deterioration in ranks, but the absolute decline in scores in states like Maharashtra, Rajasthan, Jammu and Kashmir, Orissa, Punjab, Chhattisgarh, Bihar, Uttaranchal and Assam.Important finding published by a well known expert as the key author of the report. Must read for all those interested in investments in India.

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