Economic freedom is measured in terms of three broad heads–size of government (measured by government revenue expenditure and administrative gross state domestic product (GSDP) and sundry state-level taxes as share of total GSDP, as well as share of government in organised employment), legal structure and security of property rights (using data on economic offences, crimes, completion of police investigations and court trials) and regulation of labour and business (measured by ratio of average wage to minimum wages, man-days lost in strikes and lockouts, implementation rate of industrial entrepreneurs memorandum, or IEMs, licence fees, power shortage, among other things).
India and its economic freedom of States index
Gujarat has moved to the top of an economic freedom of States index for 2012, dislodging Tamil Nadu, which held the place in 2005 and 2009. Bihar continues to remain at the bottom of the list, though its scores improved significantly between 2009 and 2011 (the year on which the data used in the 2012 report is based). Madhya Pradesh moved up from the sixth position in 2009 to the third position in 2012, trading places with the more industrially and economically developed Andhra Pradesh. The “Economic Freedom of the States of India 2012” is the third such report published by German think tank Friedrich Naumann Stiftung.