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Time to proof read the Part II of the document now

[Topics under debate]: GOOD GOVERNANCE
___Help make this manifesto better, or accept it, and propagate it!___
Here is the PART II (GOOD ECONOMIC POLICY) part of the IPI Manifesto.

I havetried to incorporate as many suggestions as I knew of, have also
tried hard
not change it so much so that it ceases to retain its identity as the
document representing the IPI community. I have not touched the parts
I didn't think I could do anything.

Please go ahead and suggest any corrections, either grammatical or in
language, in order to make it presentable and acceptable to all.

Thank You.

                        PART II
                GOOD ECONOMIC POLICY

Changing the economic system

Over the last fifty years, governments in countries with fewer natural
human resources than India have provided better opportunities for their
citizens. All data conclusively points to the fact that rapid economic
growth tends strongly to reduce poverty. What was therefore needed was
creation of an environment suitable for the generation of rapid economic

Instead, successive governments attempted to control the major sectors
economy. This has done more harm than good to India's citizens. While
promoting capitalism blindly, a first step has to be taken toward
the economic system by removing the word "Socialistic" from the Preamble
the Indian Constitution. We need to shift toward a model of minimally
regulated capitalism.
This will involve some of the following.
1.      Privatization
Privatize (and liberalize) nationalized and other public sector
so that these organizations are brought in check by market forces. This
also give people better control over their destiny. It will promote
competitive and risk-taking behavior, which is necessary, if the output
the nation is to grow sufficient enough to bring fruits of development
every citizen of India.  In particular, government ownership in the
following sectors should be dissolved or highly reduced:

Telecommunications, Media (television, radio and print), All metal
production and associated industries, Power generation and distribution,

State electricity boards, Automobiles, Cement industry, Banking,
fertilizer production, city waste management services, public transport
services such as railways.

2.      Private ownership
The principle of private ownership of everything - land, property and
output (intellectual property) - has to be very strongly and clearly
and protected. All ownership should of course lapse with time, such as
passing away of a person (through stringent inheritance laws), or
within a
certain number of years.

3.      Price deregulation:
In general, we abhor the concept of price regulation by government in
productive activity that does not directly involve serving a government
function. Government does not possess the local knowledge that is
to the determination of a price.

Production Cost, transportation cost, Market Competition, Supply and
should determine price of products. Government has no direct role in
prices of particular commodities, instead,
* it has regulatory powers, and social obligation to ensure Market
* a good government works as a catalyst in promoting research &
to improve methods to bring down production and transportation costs
effecting the pricing of the products.

4.      Deregulation of industry
Wherever possible, to promote competition, deregulation needs to be
Internal deregulation needs to be done before foreign deregulation. The
following sectors in particular need to be deregulated: banking, road

5.      Regulation against profiteering:
Freedom afforded to the entrepreneurs to fix prices (of goods or of
should not lead to profiteering. Therefore, strong (though participatory
democratic) regulatory bodies need to be established to monitor cases of

profiteering. Regulation of monopolistic behavior should primarily be
through promotion of domestic and foreign competition. Wherever
strong regulatory bodies, democratic in their composition, need to be
instituted to regulate possible profiteering.
Further, as far as wages are concerned, the government would not
with this mechanism, except perhaps to suggest "desirable" levels of
6.      Collective bargaining by labor:
In general, throughout the world, advances in productivity, not unions,
been mainly responsible for the improvements in earnings and working
conditions of the average worker. Despite this, as a part of the
wage determination process, collective bargaining by firm-specific labor

unions will be encouraged. However, industry-wide or nation-wide
attempts by
unions to interfere in the wage bargaining process amounts to using
oligopolistic or monopolistic practice by the labor force, and will be
7.      Elimination of attempts to "plan" the economy:
While we need strong supporting research organizations which will
relevant information to the Parliament and to the Government, we
do not need any intermediary organization which runs "planning" models
reek of futile and economically unjustifiable attempts at centralized
planning. The Planning Commission has to be closed down, or converted
into a
much smaller but professional, Research Wing for the Parliament.
8.      Independence of Central Bank
The Reserve Bank of India should be made independent of control by the
executive, completely out of political control, and controlled by
banking professionals. The aim is to run this organization in such a way

that it constantly, honestly, and transparently, controls and manages
monetary system. The bank should be completely free to research and
implement the best possible monetary policy for India based on the
economic and market indicators. The only focus of the Bank should be to
constantly translate economic indicators into the currency value, work
as a
mirror to show the policy makers as well as the people as to where the
inflation is going etc. at any point of time. This role of a mirror and
honest agent that measures our economy, will allow our policy makers to
swift actions to control our economy and watch it grow by looking at the

pictures shown by such impartial organization dedicated to always report
true picture. That is because inflation is the surest way to hurt the
earning members of a society. Other economic goals, such as employment
growth, should be purely under the jurisdiction of the executive.

9.      Financial, Capital, and Foreign Exchange Markets
Measures need to be taken to bring back small investors to the capital
market by raising the transparency and accountability of listed
companies as
well as that of capital market intermediaries
A market-responsive exchange rate would have to be put into place,
determined by fundamental demand and supply factors.
The numerous controls and impediments to the setting up and functioning
the derivative markets would be removed.
Constraints on hedging of exposure on international markets will be
Modern, well-regulated, forward and future markets are essential for
efficient management of risk, and would be established jointly with the
suitably qualified citizens.
10.     Following prudent fiscal and monetary policies.
The central and state budgets would be brought into balance. Inflation
be kept under strict control by allowing the Central bank to use
rate as the key policy instrument. Real interest rates would be kept at
lowest possible levels to boost investment.
11.     Intellectual Property Rights
The patents machinery in India to be tremendously strengthened and
intellectual property rights vigorously enforced. No innovation can be
supported without this basic institution.
12.     Social Safety Net
Due to the unleashing of innovation and creativity consequent to the
of economic incentives, incomes of individuals can be expected to become

more variable over the course of time. While re-training of those who
deemed surplus in a particular sector of the economy is a desirable
objective, it is costly as well as time-consuming. Therefore a social
net in the form of unemployment insurance and social security systems
has to
be immediately brought into place, mostly fully-funded rather than
pay-as-you-go, with some progressivity built into it.
13.     Equity through elimination of poverty
Inequalities of income are a necessary outcome of a society geared
the production of wealth. However, poverty is not. The focus of the
Indian society will have to be geared towards ensuring the complete
elimination of poverty.
While the growth of incomes would substantially bring down poverty,
would remain many cases where direct tax credits and other direct
would need to be applied to those who are unable, for no fault of
theirs, to
cope with the changed economic environment. Priority would be accorded
easy access to credit finance and occupational assistance to help turn
around the lives of those with genuine needs. More importantly,
education will be provided to those who are disadvantaged.

14.     IT Policy
In the information age ( that is what the 21 century is going to be
access and control of information is going to be the key to determine
success or failure of individuals and societies. In recognition of this,
must provide the
greatest support in enabling innovation and growth of information
technology. India must redefine the way  information is gathered used by
government in carrying out its duties towards improving the lives of the

people. Key institutions for Research and Training in new technologies
be promoted and sustained at the highest level. India must strive to be
innovator of new technology rather then perpetuating the constant
on the outside world in this vital future sector.

15. Agricultural policy
Phased, but complete removal of agricultural subsidies. Enacting
and Programs to encourage best practices of growing crops. Full
and logistical support to Indigenous agriculture research. Organic,
methods to be promoted to ensure healthy safe produce and to stop
of good, fertile land for the long term.
16.     Greater role of the government in provision of public goods
The government needs to focus attention on education, infrastructure,
planning, and the environment, and the task of regulating, standardizing
quality control in the interest of the consumer.
a)      Urbanization:
The magnitude and quality of urbanization is a sure and foolproof test
economic development. Urbanization promotes economic efficiency in all
fields of human endeavour by bringing together a critical mass of human
beings specializing in various sectors of the economy. Efforts should be

made to urbanize India and change the hitherto prevalent tradition of
pulling Indians to just a few, unplanned, congested urban centers.
Urbanization should not mean vacating villages and growing slums around
Mumbai and Delhi. Rather,  it should mean planned development of
across the nation, where there are roads, schools, proper and planned
housing, and a good mix of industrialization and agricultural activity,
while, at the same time, protecting the environment, wildlife and
green forest cover aimed at maintaining good quality of life and living
across the nation and not just in a few "urban centers".
b)      Infrastructure:
The role of government is critical in the provision of infrastructure,
benefits are reaped by all, and so, costs have to be borne by most.
constraints can be partially met by involving the private sector in the
entire process of construction and maintenance. However, even where such

solutions are not feasible, government should not directly construct and

maintain any structure, but sub-contract these services to private
All direct construction activities by government agencies, either
departments or public sector agencies, would be closed down. The Public
Works departments would purely sub-contract and monitor the work of
agencies. There would be very few limits on the potential size of
companies in the infrastructure sector, to allow economies of scale,
promoting competition.
The focus would be on the creation of additional capacity, sufficient to

meet the highest expected demand at the highest anticipated growth rates
the economy.
In all cases the "User Pays Principle" would operate. Nobody would be
subsidized indirectly. If any farmer or entrepreneur has to be
that would be done directly, through the Social Insurance program, where

people can easily read the total subsidy received by anyone.
c)      Environment:
There is tremendous role of government in environmental planning
protecting and helping maintain a healthy wildlife population in their
natural habitats, as well as securing a good portion of land to retain
forest cover, untouched by modern development such as sprawling
urbanization, industrialization or agriculture use. The government
set strict guidelines regarding hazardous waste disposal, and
clean water and air. There should be provision  for stiff penalties to
violators of such laws. There needs to be an independence organiztion of

environment experts and scientists, a Environment Protection Agency,
would constantly monitor and setup guidelines for helping protect the
environment while still remaining sensitive to developmental needs of
growing society.

d) Standardization and quality control:
There should be separate federal agencies to set standards of quality on

1. Food products.
2. Consumer Products of all kind.
3. Automobiles

Such agencies should be equipped with specialist expertise to make best
decisions on setting up safety standards, as well as statutory powers to

enforce such standards and penalize and discipline the violators. Such
agencies are almost non-existent  in India today, and the citizens live
the mercy of the entrepreneurs supplying food and other products in the
market, with little or no quality control from any government agency.

This is the National Debate on System Reform.       debate@indiapolicy.org
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