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India more prosperous than China, finds Legatum Prosperity Index

Demonstrates very high levels of social capital, but overall ranking brought down by low levels of education, internal security and health

LONDON, October 26, 2009 – The third edition of the Legatum Prosperity Index, published on 26 October, 2009 ranks 104 countries (covering 90% of the world’s population), based on a definition of prosperity that combines economic growth together with measures of happiness and quality of life.


According to this year’s Legatum Prosperity Index, India ranks 45th in the world, slightly behind emerging giant Brazil (41st) but well ahead of China (75th). Although outperformed by China on several economic indicators, India’s superior overall ranking is achieved through its performance in the critical non-economic factors such as personal freedom which encompasses freedom of speech and religion, national tolerance for immigrants and ethnic and racial minorities and for which India ranks 47th globally compared to China’s 91st place. India also ranks highly on measures of social capital, reflected in the percentage of citizens who volunteer, give to charity, help strangers, and who feel they can rely on family and friends. In this area, India ranks fifth in the world, ahead of the US, the UK and Finland.

Finland tops the Index, with the U.S. ranking ninth out of 104 countries in the Index, ahead of large European nations such as Britain, Germany and France, which all still make the top 20. Finland is narrowly ahead of Switzerland, Sweden and Denmark; Zimbabwe ranks last, following Yemen and Sudan.

“India is a classic example of a country whose prosperity stems largely from its social capital and quality of life rather than its performance on the purely economic measures. Although China outperforms India on several economic indicators, India is 30 places higher in the final rankings because of China’s poor levels of personal freedom and democracy,” said Dr. William Inboden, Senior Vice President of the Legatum Institute. “However, there are some areas of concern for India, particularly in the quality of healthcare and education for which India ranks 88th and 86th respectively,” concluded Dr. Inboden.

India’s low global ranking on health indicators results from a number of factors: severe underinvestment in medical facilities resulting in poor standards of healthcare; low levels of improved sanitation facilities; undernourishment affecting 20% of Indian citizens; a low average health adjusted life expectancy of 53 years; and a high number of citizens reporting that they suffer from health problems.

Key Findings from the 2009 Legatum Prosperity Index
• Finland tops the Index, followed by Switzerland, Sweden, and Denmark; the United States is 9th and the United Kingdom is 13th.
• India ranks 92nd globally in the ratio of girls-to-boys in education (91:100).
• There are approximately 40 students per teacher in primary education which ranks India low globally on this measure.
• India has the highest level of casualties from political violence of all countries in the Index.
• India requires only 11 start-up procedures in order to register a new business, which resulted in over 20,000 new businesses registrations in 2007.
• There are only two personal computers per 100 people in India ranking the country below the global average on this variable.

The Index identified nine key factors that drive economic growth and personal wellbeing, which are foundations of prosperity. Each of these nine factors is represented in a sub-index and a country’s final Prosperity Index ranking is generated by averaging its scores across all nine sub-indexes, equally weighted. More information on the Prosperity Index, including full country rankings, background on data and methodology, and profiles of each country can be found at www.prosperity.com.

The Prosperity Index accounts for 90 percent of the world’s population, using a combination of objective data and subjective responses to surveys. This data comprises 79 different variables, and each is then distilled into one of the nine different sub-indexes identified as a foundation of prosperity.

India’s Performance Across all Nine Sub-Indexes

Economic Fundamentals: 43
Democratic Institutions: 36
Health: 88
Governance: 41
Social Capital: 5
Entrepreneurship and Innovation: 55
Education: 86
Safety and Security: 87
Personal Freedom: 47
Overall Ranking: 45

What does the Prosperity Index tell us? Its value is found not only in its global rankings but also in what it can tell us about how prosperity is created. The following are ten key findings of the Prosperity Index:

1. Prosperous countries are strong across the board.
Prosperous countries which lead the Index do well in all nine sub-indexes, indicating that the foundations of prosperity reinforce each other.

2. Entrepreneurs at the micro level need good economic policies at the macro level.
Innovation and entrepreneurship are more strongly related to economic fundamentals than any other factor in a society. Aspiring entrepreneurs will often hit a "ceiling" limiting their success if a nation’s economy is not fundamentally strong.

3. Freedom cannot be divided.
While some nations seek to allow one aspect of freedom while restricting other aspects, prosperous nations respect freedom in all of its dimensions: economic, political, religious, and personal.

4. Prosperity is concentrated in the North Atlantic – for now.
Sixteen of the top 20 most prosperous countries sit in North America and Europe.

5. History is not destiny.
Highly ranked nations include those with a long history of productive economies, effective and limited government, and social capital. Yet several other nations rank high that not long ago were afflicted with poverty, oppression, and unhappiness.

6. Good governance is central to life satisfaction and economic progress.
Countries in which sound governance creates satisfied citizens are also the most likely to have the healthiest economic fundamentals and the most entrepreneurial societies.

7. Prosperity means security.
Security and safety function as both a cause and an effect of overall prosperity. A secure nation enables its citizens to flourish without fear of attack or harm, and prosperous citizens provide the financial resources and social capital to maintain safety and security.

8. Happiness is ... opportunity, good health, relationships, and the freedom to choose who you want to be.
The highest levels of overall life satisfaction are reported in countries which score best in the areas of health, safety, personal freedom, and social capital.

9. Strong communities are better than weak governments.
Some countries with ineffective governments still score well on social capital, indicating that healthy networks of families and friends play an essential role in helping a nation function.

10. It's true that money can’t buy happiness ... unless you are poor.
Only in the poorest countries do increases in income have a significant effect on people’s life satisfaction.

For more information, check the following links:

http://www.prosperity.com/downloads/2009LegatumProsperityI
ndexFactsheet.pdf

http://www.prosperity.com/downloads/2009LegatumProsperityI
ndexRankings.pdf

http://www.prosperity.com/downloads/2009LegatumProsperityI
ndexReport.pdf