Unease of doing business

Judicial intervention in economic activities hurts livelihoods. A developing country can ill-afford such activism

Written by Sanjaya Baru | Published:June 9, 2017 12:05 am
indian judiciary, judicial intervention, coal scam, india economy, indian express editorial page, latest news The time has come for economists to quantify the negative impact of judicial directives on employment and national income.

Reacting to a series of judicial pronouncements questioning executive decisions, former minister for law and justice, Salman Khurshid, once famously observed that the judiciary must make a distinction between “honest mistakes” and dishonest ones, to avoid what the media has long dubbed “policy paralysis”. The recent alleged miscarriage of justice in the case of a former secretary in the ministry of coal, H.C. Gupta, has once again highlighted the importance of this distinction, if the normal functioning of the government and, more importantly, the economy has to be ensured.

The decision of a Central Bureau of Investigation court, functioning under the orders of the Supreme Court, to sentence Gupta to a two-year jail term, has sent shock waves across the civil service, forcing a former cabinet secretary, B.K. Chaturvedi, also known for his impeccable credentials for honesty and integrity, to defend the officer and the larger principle of “honest mistakes” (IE, May 24).

Interestingly, in the very week that the media has been focused on the Gupta coal case, another former coal secretary, P.C. Parakh, has come out with a second book on what he calls the Coal Conundrum: Executive Failure and Judicial Arrogance. Parakh, yet another civil servant with impeccable life-long credentials for honesty and integrity, became a victim of the CBI’s incompetence, and worse, the judiciary’s “arrogance”, as he puts it.

Parakh’s passionate and detailed rendering of the so-called “coal scam” that had tarnished the Manmohan Singh government is a humble call for greater competence on the part of the investigating agency and the judiciary. “No one expects judges to have domain knowledge of all matters that impinge on their decisions,” admits Parakh, and adds, “However, they must have the humility and grace to seek expert advice in matters outside their own expertise. The uppermost thought which comes to one’s mind (on the Supreme Court’s coal allocation judgment) is that when the courts deal with highly specialised subjects, they should be extra-cautions in drawing conclusions and making observations, which do not match with field realities.”

At least the head of the CBI, who hounded and abused Parakh, Ranjit Sinha, has met with his comeuppance when the Supreme Court observed earlier this year that it was “prima facie satisfied and convinced” that Sinha had abused his position as CBI director. But what of the learned judges who have damned Parakh? At the end of 35 years of government service, says Parakh, he owns a 1,600 square foot two-bedroom apartment in Hyderabad, and has no wealth other than his lifelong reputation for honesty and integrity in public life. How can anyone arrogate to oneself the power to deprive a man of that intangible?

The Parakh and Gupta cases are only the latest in a series of such judicial pronouncements on economic policy issues that many have come to view as the consequence not just of judicial over-reach or ignorance, but of what Justice Ruma Pal termed, in her Tarkunde Memorial Lecture, as “judicial arrogance”, having a huge negative impact on the economy. The time has come for economists to quantify the negative impact of such judicial directives on employment and national income.

Consider some recent examples of judicial overreach disrupting normal business. The Supreme Court’s order banning the sale of liquor up to 500 metres from national highways resulted in income and employment losses across the country that one former chief justice of the Delhi High Court estimated to be around Rs 50,000 to Rs 75,000 crore. What happened then? Many have found ways to get around an arbitrary decision, but who bears the burden of the loss inflicted?

Courts have ordered the closure of factories, shops and a variety of employment generating activities with no consideration at all for the impact of such decisions, in some cases, whimsical, on the livelihood of the economically weaker sections. Can a poor, developing economy, seeking desperately to increase employment opportunities, afford such judicial intervention in economic activity?

True, the judiciary only steps in when someone seeks its intervention. But a judge can also dismiss spurious and trivial appeals in larger public interest.

With every passing day, new forms of economic intervention by the judiciary are being sought by all manner of busybodies and self-appointed activists. Consider a recent example of judicial intervention sought to direct the Life Insurance Corporation of India (LIC) on where it can invest its funds and where it should not. An appeal has been made that the LIC should not invest in tobacco companies. Another could be made that public financial institutions should not support carbon-emitting thermal power.

There are any number of socially-relevant causes that publicly minded individuals may feel strongly about. In a democracy, it is for the government of the day to legislate laws to deal with such issues. Not for courts to issue advisories and declare criminal what may often be normal economic activity protecting livelihoods. The economic consequences of such intervention can be negative if not adequately informed by professional assessment of its relevance and consequences. The judiciary has presently no means at arriving at such informed decisions.

A quarter century ago, the then-Prime Minister P. V. Narasimha Rao ended India’s infamous “licence-permit quota raj,” in which professionally ill-equipped government officials would determine how much of what product should be produced by whom, where and sold for what price. Since 1991, every successive government has been trying to further liberalise economic activity to enhance the ease of doing business, with the aim of promoting employment and generating incomes.

However, it would seem that in the past few years, the judiciary has emerged as a new stumbling block in the “ease of doing

business” in India. Hasty and ill-considered judicial diktats seem to be restoring the control-permit raj. It is time our learned judges stepped back and reflected a bit on the damage such decisions have done to the economy.

The writer is distinguished fellow, United Service Institution of India, New Delhi

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