For a government so devoted to rankings and ratings, India dropping 20 places to 143 in the 2017 Index of Economic Freedom must have been a bummer. If Prime Minister Narendra Modi felt it worthwhile to approvingly cite Indias 19-place improvement in the World Banks Logistics Performance Index, surely such a dramatic fall in economic freedom should send alarm bells ringing? Compiled by the conservative Washington DC-based Heritage Foundation, the Index of Economic Freedom has an unambiguous free-market tilt. It ranks countries based on 12 factors:

And on the face of it, India seems to have taken quite a hit:

Now you might say that these indices are arbitrary, opaque or irrelevant, and you would have a point. Heritage doesnt tell us how these scores are calculated, and only five of the 12 variables are drawn from concrete data, as opposed to more subjective surveys by the World Economic Forum, the World Bank, Transparency International etc. The way the index is calculated, modest changes in one or two variables can send a country up or down five to 10 places.

Since many of these appear to be subjective measures (e.g. property rights, judicial effectiveness, government integrity), small rank changes could simply reflect random measurement error. Furthermore, its debatable whether saying that India ranks three spots higher than Brazil under property rights is truly meaningful.

There are conceptual issues too. If you give Sudan, Sierra Leone and the Democratic Republic of Congo top billing under government spending and code the welfare states of Finland, France and Denmark as low in this case, are you not implausibly suggesting that weak government capacity produces prosperity?

More broadly, a 2012 paper by economists Aleksander Keeljevi? and Rok Spruk finds that country rankings can change once you account for endogeneity the fact that richer countries will already tend to be freer economically as well as for how various components of the index affect prosperity differently (e.g. fiscal and monetary variables have a bigger impact than rule-of-law variables).

Amitabh Dubey | Chunauti.org

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India's economic freedom plunge | Business Standard News - Business Standard