Pakistan has been ranked two points ahead of India in the Index of Economic Freedom 2017 published by Washington’s No. 1 think tank, The Heritage Foundation, which measures the principles of economic freedom and progress.
Economic freedom is the fundamental right of every human to control his or her own labor and property brings greater prosperity. In an economically free society, individuals are free to work, produce, consume, and invest, and governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty.
Pakistan is ranked at 141 out of a total 180 countries, while India is ranked at 143. However, both countries are ranked in the ‘Mostly Unfree’ category.
The reports states that Pakistan has pursued reforms to improve its entrepreneurial environment and facilitate private-sector development. The financial sector has undergone modernisation and restructuring while progress in improving the entrepreneurial environment has been modest.
However, overall progress lags significantly behind other countries in the region. The tax system is complex and inefficient despite reforms to broaden the tax base and increase transparency, wile unstable democracy and threat of terrorism have made the business operating environment more challenging in recent years.
Furthermore, it states the judicial system of Pakistan suffers from a serious backlog, and corruption continues to taint the civil service, while excessive state involvement in the economy and restrictions on foreign investment are serious drags on economic dynamism.
The index states that India is a significant force in world trade but corruption, underdeveloped infrastructure, and poor management of public finance continue to undermine overall development
In India growth is not deeply rooted in policies that preserve economic freedom while progress on market-oriented reforms has been uneven and a restrictive regulatory environment discourages entrepreneurship.
According to the according to the editors of the Index, the world economy is ‘moderately free’ with another rise in economic liberty leading to a fifth annual global increase. Among the 180 countries ranked, scores improved for 103 countries and declined for 73 (16 of which recorded their lowest Index scores ever).
The world average score of 60.9 is the highest recorded in the 23-year history of the Index. Forty-nine countries, the majority of which are developing countries, achieved their highest-ever Index scores.
Hong Kong and Singapore were ranked first and second in the rankings, while five other frequent top 10 finishers — New Zealand (3rd globally), Switzerland (4th), Australia (5th), Estonia (6th) and Canada — also improved their scores.
A surprise newcomer to the top 10, the United Arab Emirates took the 8th spot. Ireland (9th) and Chile (10th) saw their scores dip but still managed to round out the global top 10 ranking.
The Index of Economic Freedom documents the positive relationship between economic freedom and a variety of positive social and economic goals.
The ideals of economic freedom are strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, democracy, and poverty elimination.
Launched in 1995, the Index evaluates countries in four broad policy areas that affect economic freedom: rule of law, government size, regulatory efficiency and open markets.
There are twelve specific categories: property rights, judicial effectiveness, government integrity, tax burden, government spending, fiscal health, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom.
Each of the twelve economic freedoms within these categories is graded on a scale of 0 to 100. A country’s overall score is derived by averaging these twelve economic freedoms, with equal weight being given to each.