Accolades for Gujarat chief minister Narendra Modi, who last month won third consecutive assembly elections, keep pouring in. The state has been ranked topper in the economic freedom index, according to a new report.

“Gujarat’s freedom index score has been rising fast, and at 0.64 it is now far ahead of second-placed Tamil Nadu (0.56),” notes the report, ‘Economic Freedom of the States of India 2012’, authored by Ashok Gulati, Bibek Debroy, Laveesh Bhandari, and Swaminathan S Anklesaria Aiyar.

The analysis of 20 states on the parameter of freedom index was released by former RBI governor and Rajya Sabha member Bimal Jalan in New Delhi on Tuesday. It states that other states have a long way go before they can catch up with Gujarat on this parameter. The index is based on the size of government, legal structure and regulation of labour and business.

“Gujarat serves as an example to other states in India which is lagging far behind. The agriculture growth is close to ten percent. It is a global success story. You don’t hear such story,” said Gulati, chairman, commission for agriculture costs & prices, ministry of agriculture.

According to the report, Gujarat has seen significant improvement in its regulation of labour and business index values and has retained its preeminent position. “The success is based on achievements in agriculture, social welfare programmers and water resource management,” the report notes.

Among other states

Meanwhile, Madhya Pradesh has registered the biggest jump, improving its rank from sixth to third position. Tamil Nadu, ranked number one in the 2009 freedom index, is now ranked in the second position.

Bihar’s impressive economic growth in the last four years has not helped it climb the freedom ranking. The state has maintained its last rank (20) since 2005 when the first economic freedom ratings were released. However the report appreciates that, “Despite its 20th rank in the current freedom index, Bihar has shown steady improvement in their index values and relative ranking – benefitted from economic growth without commensurate increase in the size of government.”

West Bengal, Jharkhand and Bihar are the bottom three in terms of economic freedom.

The report notes that Punjab is losing its economic leadership and steadily slipping behind other states. In the latest index, Punjab stands 12th, no change from the last time ranking in 2009. “Punjab’s relative decline can be traced to several factors, of which the most important is a serious fiscal crunch. This in turn is due mainly to the supply of free electricity to farmers. Other reasons include the agriculture plateau reached by the green revolution,” says the report.

The median score for economic freedom of all states, which had declined from 0.38 in 2005 to 0.36 in 2009, has improved substantially to 0.41 in 2011. States like Tamil Nadu, Chhattisgarh, Andhra Pradesh, Jharkhand, Maharashtra and Haryana have shown decline in index values compared to 2009. “This is worrisome as some of these states like Jharkhand and Maharashtra were among the poor performers in 2009 as well,” the report notes.