Economic freedom lies at the heart of human dignity. It gives individuals the confidence to make choices about work, property, consumption, and life itself. Yet in India’s high-growth economy, a paradox is becoming harder to ignore: rapid GDP expansion is coexisting with shrinking economic freedom for a vast majority of citizens. The debate is no longer about growth alone, but about who benefits from it—and who is being left behind.
What economic freedom really means
Economic freedom goes beyond income levels or consumption figures. It includes the ability to choose one’s work, enjoy the fruits of labour, own and control property, and participate meaningfully in markets without coercion. Free people and free markets reinforce each other, creating the conditions for innovation, enterprise, and social mobility. An economy that grows while constraining these freedoms may expand in size, but not in well-being.
Why GDP is an incomplete measure of prosperity
The popular belief that higher GDP automatically translates into better living conditions masks deeper realities. GDP captures the value of goods and services exchanged in markets, but ignores income inequality, environmental degradation, health, education, job quality, and the lived experience of freedom. A rising GDP can coexist with stagnant wages, insecure employment, and declining purchasing power—especially for those outside the top income brackets.
What global indices say about India
Since 1995, the Heritage Foundation has published the Index of Economic Freedom, which assesses countries on rule of law, government size, regulatory efficiency, and market openness. The 2025 Index warned that economic freedom is under global pressure. India ranked 128th out of 176 countries, scoring 53 out of 100 and classified as “mostly unfree.” Notably, India has remained in this category since 2002, with the report observing that middle-class freedoms are being squeezed even as wealth concentrates at the top.
Consumption-driven growth and the rise of ‘India1’
India’s growth model is heavily consumption-led, with private consumption accounting for about 60% of GDP. However, this consumption is increasingly concentrated. The top 10% of Indians account for nearly two-thirds of discretionary spending on non-essential goods. According to the Indus Valley Report 2025 by Blume Ventures, this segment—termed ‘India1’—functions like a high-income country within India. With around 14 crore people, India1 would rank as the world’s tenth most populous country, and its per capita income would place it far above India’s overall rank, as per World Bank data.
Luxury consumption and gated prosperity
The preferences of this top 10% are reshaping markets and cities. From gated communities and destination weddings to luxury cars and premium travel, consumption patterns increasingly reflect elite tastes. Around 16 million gated households now account for a disproportionate share of urban spending, reinforcing socio-spatial segregation. India’s real estate boom—projected to touch $1 trillion by 2030—is being driven largely by luxury and premium housing, with demand for high-end homes rising sharply since the pandemic.
Skewed markets and declining choices for the majority
As corporates chase high-margin luxury segments, resources and innovation are diverted away from affordable products and services. This deepens monopolistic tendencies, limits competition, and constrains consumer choice for low- and middle-income groups. The bottom 90% of Indians, nearly a billion people, have little or no discretionary income after meeting basic needs. Rising costs of food, housing, healthcare, and education leave them with no savings cushion, making economic freedom largely theoretical.
Jobs, wages, and the erosion of real freedom
Poverty remains the single biggest barrier to economic freedom. Weak job creation, informal employment, and inflation outpacing wage growth have reduced real incomes. For many Indians, the freedom to choose work is constrained by necessity rather than preference. Markets are failing to deliver what the majority need most: secure jobs, rising wages, social security, and dignified working conditions.
Policy choices and the imbalance of freedom
The growing concentration of economic freedom among a few is not inevitable. It reflects policy choices, regulatory frameworks, and the balance of power in markets. When coercive power—whether through monopolies, weak labour protections, or unequal access to opportunity—dominates markets, freedom shrinks for most. As the Indus Valley Report cautions, when a billion citizens cannot participate in the non-essential economy, the ripple effects will eventually undermine innovation, demand, and long-term growth itself.
What to note for Prelims?
- Concept and components of economic freedom.
- Heritage Foundation’s Index of Economic Freedom and India’s ranking.
- Consumption-led growth and income concentration in India.
- India1 concept from the Indus Valley Report.
What to note for Mains?
- Critically analyse GDP as a measure of economic well-being.
- Discuss the relationship between inequality and economic freedom in India.
- Examine how market concentration and luxury-led growth affect inclusive development.
- Suggest policy reforms to restore balance between growth and economic freedom.
