Economical with the Truth! 

By Mohan Guruswamy  


New Delhi, 14 June 2005

Guru is back with a hard hitting, facts supported indictment of the performance of the Gujarat State. In the bargain he lucidly explains the concept of 'Economic Freedom', which has been somewhat loosely used by the Gujarat government to explain its claim to be "the best governed state".

The Narendra Modi government in Gujarat has been going to town claiming to be the “best governed state” on the basis of a supposed accolade by the Rajiv Gandhi Foundation, incidentally headed by Sonia Gandhi. If this were so it would be the Congress Party’s self-goal equivalent of the BJP, discovering MA Jinnah to be secular. But it is not so for the RGF did not certify that Gujarat is the best-governed state in India, just as Advani did not certify that Jinnah was secular. But we are dealing with the perceptions created and the Modi government is just trying to take advantage of getting rated best for something called “Economic Freedom”. But what is Economic Freedom?

The notion of Economic Freedom traces its origins to a series of seminars between 1986–94 sponsored by the Fraser Institute of Canada and hosted by Milton and Rose Friedman. Milton Friedman is a Nobel Prize winner in Economics and his brand of economics stands at the most rightward fringe of the spectrum. His policy preferences have been criticized by a galaxy of economists including John Galbraith and Amartya Sen as insensitive to people and sensitive only to profit. The economics espoused by Milton Friedman is also known as the Chicago School and its most sincere adherent was the regime of Augusto Pinochet in Chile. Other prominent proponents of Economic Freedom are two of the most conservative US think-tank’s, the Heritage Foundation and the Cato Institute. It is therefore somewhat ironical that this extremely rightwing notion is being advocated in India by the Rajiv Gandhi Institute of Contemporary Studies (RGICS) of the Rajiv Gandhi Foundation. One must wonder what the UPA’s National Advisory Council has to say about Economic Freedom?

While Economic Freedom is packaged as a new idea with the Wall Street Journal happily celebrating just its eleventh anniversary, it is in fact mostly a rehash of all that went with the Cold War ideology of free enterprise and free markets. Whatever it is, it is not an economics term that finds recognition in my copy of the MIT Dictionary of Economics. What it actually is, is nothing but a brand of politics promoting an ideological lifestyle favored by ultra-rightists. The Fraser Institute itself best describes it as follows: “Economic Freedom is the extent to which one can pursue economic activity without interference from government. Economic Freedom is built upon personal choice, voluntary exchange, the right to keep what you earn, and the security of your property rights.” Simply stated this just means that good governments are those which let rich do what they want, take all they want, and keep all they want, and the people be damned. In short the market will take care of everything. This is as dumb an ideology as that where the state is everything and takes care of all.

The annual Economic Freedom of the World Report published by the Fraser Institute in conjunction with members of the Economic Freedom Network, ranks countries on their level of economic freedom. Incidentally the RGICS is not a part of this network, which then begs the question as to why it got involved with something so dumb as appearing to endorse the Narendra Modi government?

Last year’s rankings had India ranked 68 along with Bahamas, Belize, Ghana, Tanzania and Tunisia and way below countries with few real freedoms like UAE (16), Kuwait (18), Oman (18), El Salvador (27), Panama (27) and Jordan (36). Thus it seems that while Economic Freedom is a composite index of individual liberty, limited government and free markets, the weight accorded to individual freedoms is at best marginal.  On a scale of 10 even the top ranking Hong Kong got 8.7, while the USA got 8.2. Apparently the standards demanded by the makers of Economic Freedom are much too high even for these holy centers of capitalism? The Heritage Foundation in conjunction with the Wall Street Journal seem to have a somewhat different scale but it comes to about the same conclusions. Thus while their index considers Saudi Arabia to be mostly free, it considers India to be mostly unfree, like China!

Now lets get back to the Narendra Modi government, which is claiming via full-page advertisements that it is the best-governed state in India. That’s not even close to the truth for that is not what the RGICS study is about either. “Economic Freedom” is not about good government. It is not even about economic achievements. It is about the least government and looking most business friendly. It is as if a policeman is to be judged by how crisp and clean his uniform is and not by his professional achievements.

Gujarat’s achievements in economic and social development during the last decade do not support its advertisement of itself as the best governed state. In terms of economic growth at constant prices in the decade after 1993–94, Gujarat averaged a growth of 6.72% which ranks it well below first placed West Bengal’s 8.55% and Karnataka’s 7.29%. In fact Gujarat’s performance is 0.15% below the national average and just 0.10% more than Bihar’s. The last one would probably be the unkindest cut of all for we know economic growth in Bihar is almost entirely unassisted by the state governments exertions or the central governments benevolence.


In reduction of poverty, Gujarat has achieved a decline of 65.87% since 1977, which while commendable only places it sixth, well below Goa, Kerala, HP, Haryana and Punjab. Even now after so much of good government particularly under Keshubhai Patel, Sureshbhai Mehta and Narendrabhai Modi, Gujarat still has 14.07% living below the poverty line placing it only fourth from the top! While Gujarat has the highest per capita spending on Roads and Irrigation, it ranks only sixth in per capita spending on Health and Education.

The consequences of these can be seen in the human development indices. In terms of reduction of Infant Mortality Rate (IMR), Gujarat has achieved a reduction of 17.94%, which is eleventh in terms of rank leaving it with an IMR of 64 which places it seventh. Gujarat doesn’t do too well in terms of life expectancy with the average longevity being 62.15 years which puts it at eighth place below even Bihar’s 62.85 years. Again in terms of sex ratio, Gujarat is running neck to neck with Bihar with 921 females to every 1000 males. In terms of literacy Gujarat once again is not among the top with 69.97%, which ranks it sixth. When it comes to overall population growth, Gujarat with an annual growth of 2.42% is once again sixth in the ranking. Even in terms of population between ages of 5–14 enrolled in schools, Gujarat with 74.35% stands at sixth place.

The RGICS study of Economic Freedom apparently includes “efficient and effective legal system ensuring complete investigation” as a measure. Presumably they did not to consider the Justice Bannerjee Report on the Godhra incident or the Justice SC Jain’s Central Pota Review Committee order excluding the 130 persons from Pota for the same alleged offence. The thousands killed in the rioting and the about turns seen in the Best Bakery case are additional testimony to the effectiveness and efficiency of the legal system in Gujarat, just as they are to the “highest level of safety of life and property and lowest incidences of violent crimes in the country” claimed by the Gujarat government. Here one is hard pressed to contest Gujarat’s contention of having the least government.

There is another perspective on this we could also consider. In terms of value of property stolen during 2003, Gujarat reported Rs. 32,419 lakhs as stolen placing it just below Maharashtra. In terms of property recovery Gujarat had only 9.5% whereas top ranked Haryana managed 68.3%. Then there is another interesting statistic about Gujarat that is quite telling. In 2003 Gujarat reported 1044 cases of kidnapping, which is about half of the numbers reported from the traditional kidnapping states like Bihar, UP and Rajasthan, but well above MP, Maharashtra, Tamil Nadu and Karnataka. But what makes Gujarat truly unique is that almost 90% of those kidnapped were below 30 years and nearly 80% kidnapped were women. This is almost twice the national average. So much for “the highest level of safety of life and property” claimed in Gujarat. The National Crime Records Bureau also reports that Gujarat was no slouch when it came to violent crime with 13.1% putting it ahead even of UP, West Bengal and Punjab, and in terms of IPC crime rate Gujarat with 197.0 was above the national average of 160.7.

There are some other measures we can consider. In terms of net industrial value added, Gujarat ranks third below Maharashtra and Tamil Nadu. It has performed poorly in terms of growth of electricity generation since 1993–94 with a growth of only 18.69%, when the national growth was 43.75%. As a matter of fact among the bigger states it stands only ahead of Bihar. Quite clearly there is more to good governance than just Economic Freedom. Gujarat has not done too badly but to claim that it is the “best governed state” in India based on some dubious index is to be somewhat economical with the truth.

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