'State lacks economic freedom'

Industrialists complain of too much intervention of government

Economists argue that Karnataka stands in 15th position in the Economic Freedom Index (EFI) of the country because of its less attention to economic reforms. A representative of industrialists complained of too much intervention of the government which obstructed economic growth.

However, the government defended its regulations stating that if there were enough regulations the US would not have faced recession. A workshop on ‘The Role of Economic Freedom in Development of Karnataka’ was jointly organised by the Press Institute of India, Friedrich Neumann Stiftung Fur die Freiheit (FNF) and Rajiv Gandhi Institute for Contemporary Studies (RGICS).

RGICS Associate Director Dr P D Kaushik said, as per the EFI 2007-08 figures Karnataka was pushed down to 15th position from 8th position in the previous year. Economic Freedom Index of the states was prepared considering the size of the government, legal structure and security of property rights, freedom to trade internationally, taxes and enterprises and regulation of credit, labour and business.

In the State, one has to take 67 approvals to start a school. There are about 147 regulations with respect to labours’ safety. These issues bring down the State in the EFI.
Countries which achieved higher level of economic freedom have always recorded higher per capita income than other countries. As long as an economic activity conforms to the rule of law there was no need for government’s intervention, he argued.

Wrong parameters

Principal Secretary of Finance Department M R Sreenivasamurthy was opposed to parameters considered for assessing the EFI. “We have the freedom to set our own parameters to assess economic freedom. Why should we follow a set of parameters fixed by one school of economists?”, he asked. Developing countries need not follow what the developed countries recommend. They should follow what those countries did to develop, instead, he said. He argued that the US would not have suffered the economic recession if it had adopted necessary economic regulations.

In the context of Karnataka, over 56 pc of the total population depend on agriculture, which contributes only 17 pc to the State’s Gross Domestic Product. However, the remaining 44 pc of population contribute 83 pc to the GSDP. The average per-capita income of the State stands at Rs 40,000. Whereas the average per capita income of those in the non-agriculture sector is Rs 80,000 and those in agriculture sector is only Rs 13,000, he said.

Listing the areas towards which the government need to give more attention, he said, the dependence on the agriculture should be brought down considerably. Providing better quality education, improving skills among the educated, providing employment opportunities for rural women and affirmative actions for deprived section are other areas need extra attention to achieve economic growth, he said.

FKCCI chairman J Crasta alleged that rampant corruption in Karnataka had been spoiling the economic growth of the State. Those who pay tax were being harassed, while the tax-evaders go scot-free. Of 25 lakh business establishments in the State only three lakhs had been registered with the Commercial Taxes Department. The government had not been able to bring them under the tax net, he pointed out.