Pakistan fared better against India when it came to equity market performance. This time around, Pakistan leaves India behind in economic freedom ranking. According to the recent 2017 Index of Economic Freedom ranking, Pakistan took the 141st position while India was placed at the 143rd. The Economic Freedom report was published by the Heritage Foundation. It measures trade freedom, investment freedom, business freedom and degree of property rights protection in 186 countries around the globe.
Read More: Pakistan Ahead of India in Development
Pakistan and India are both ranked close to the bottom, and Pakistan does not outrank India by much in the economic freedom ranking. Nonetheless, Pakistan has been outperforming India consistently over the recent past. How does it matter? Well, these rankings, no matter how minute, speak volumes to equity market investors. Gains in economic freedom ranking are generally associated with higher economic growth rates. Pakistan’s performance in the equity market, especially in the past year, offers a glimpse into why Pakistan outranked India.
|Global X Pakistan (PAK)||38.44%|
|iShares S&P India 50 (INDY)||1.03%|
Source: finance.yahoo.com 2/27/17
A closer look into the numbers reveal that Pakistan fared much better than India in the areas of government spending and business development, another factor significantly affecting financial market performance.
|Country||Overall Ranking||Score||Property Rights||Business Freedom||Labor Freedom||Government Spending|
Source: The Heritage Foundation
A quote from the Pakistan report read,
Pakistan has pursued reforms to improve its entrepreneurial environment and facilitate private-sector development. The financial sector has undergone modernization and restructuring.
While a quote from the Indian report read,
The state maintains an extensive presence in many areas through public sector enterprises. A restrictive and burdensome regulatory environment discourages the entrepreneurship that could provide broader private-sector growth.
In layman’s terms, Pakistan is trying to back economic growth with entrepreneurship while India continues to place economic growth heavily with government bureaucrats. This essentially means that Pakistan is better equipped to boost her economy and equity markets.You can follow us on Facebook, Twitter, or Google+ for more updates. Otherwise fill in the subscription box above, or subscribe to our RSS Feed.