It is very evident from the events of the last two years that a robust regulatory framework is a must for a successful free market economy. India should be careful while building the framework. It should ensure that the shoulders of the regulators are not misused by the incumbents to keep out competition. A robust banking system is vital for any free market to function. A rogue operator in a free market can be a risk for all. The failure of Bear Stearns, Lehman Brothers and AIG roiled the World Markets and nearly created a repeat of the Great Depression of 1929. The key for the success of free markets in India would be our ability to build Institutions that create the regulatory framework that will let free enterprise thrive without hindrance but at the same time is alert to systemic risks. Tasks will range from ensuring that Banks are well capitalized or Securities laws are followed or predatory lending practices are not allowed or Price gouging is prevented. Regulators are the referees of the free market system who ensure that the system is fair.

But it is vital that regulations don’t become a maze of mind numbing red tape and become another layer of bureaucracy that hinders Human creativity and enterprise. They have to ensure that the system is fair, that there are no cartels or anti-competitive behaviors. Building of these institutions would be the key for India in the coming decade. The honesty, integrity, objectivity and capability of the regulators and the regulatory framework will be vital for the sustained prosperity of our country.

What could be “the heart” that markets need? While Man has mastered production so that there is enough food minimum for people to survive, most of the problems of Poverty can be traced to vested interests who stymie Competition. Why is it that as India has become prosperous Naxalism has emerged as a threat in some of India’s poorest Districts? It can be traced to the fact that there is exploitation by vested interests of the poor. Land is forcibly acquired and the indigenous people are given very little compensation. This compensation rapidly diminishes in value due to inflation or is wasted on drink. With no skills to eke a living and no state support they become susceptible to such reprehensible ideologies such as Naxalism.

It becomes incumbent on the Political leadership to ensure that every one could derive the fullest advantages that free markets offer. Free markets throw up losers from time to time. Typically the worker whose job is gone or skill has become redundant. It becomes incumbent for the political leadership to ensure that opportunities for constant up gradation of skills are available.

A critical element is to ensure access to opportunity for all. The benefits of a free market and the future of India would come only if all have equal access to opportunity. It is vitally important that every child gets access to primary education and based on his or her ability have the opportunity to progress to the full potential. In India recently there has been a notification that every school in the country should accept 25% of their students from the economically weaker sections of society. This is in the right direction. Gifted children should have the opportunity to go to exclusive schools regardless of the economic status of their parents.

As a capitalist society throws winners and losers it is vital that the system is seen as fair and as providing equal opportunity for all. It is cronyism, corruption and anti competitive practices that gives free markets a bad name.

The other critical factor for development is free trade. Only Free Trade can accelerate the sustained growth – of India and any other country. The failure of the Doha Round due to intractable unreasonableness especially of the Developed Countries on Agricultural tariffs has cost countries like India dear.

Free economies live within a world of incentives and new possibilities. Such a system is designed to get the best out of people, to inspire their creativity and cooperative impulses. This may seem like an ideal. But it is imperative for India to embrace such ideals and let the free market cure our poverty. (IPA Service)