Ramifications of Delayed Judicial Decisions on Indian Economy

A startling picture of Indian Judiciary appeared when Justice Natchiappan, Head of Parliamentary affairs Committee on Law and order, addressed the pendency of 2.5 Cr. odd cases involving Rs. 4 Lakh crore at different stages in various courts across the country recently. In another finding by an agency DAKSH which is creating a database of court data, over 40 Lakh cases are pending in High courts, and a tenth of these have been pending for more than 10 years. Delay in judicial decisions often results in draining of resources and loss of morale, opportunities, and hope of litigants. But can these behavioral and microeconomic effects impact a nation’s economy?

In an economy, various stakeholders – private sector firms, government, foreign firms etc. interact and many times, situations of conflict of interest spring up where litigation becomes a natural choice for resolution. But prolonged periods of wait for decisions put the economic activities on halt resulting in compounding of unforeseen losses due to non-operation, increase in debt cost, cost of working capital, wastage of productive hours of human resources and physical stock. A comparable situation was seen in ‘Coalgate’ when there was delay in decision of reallocation methodology of coal mines after previous allocations were cancelled. Many power generators suffered losses in this ‘wait’ period which turned their power generating units into bad assets. The uncertainty and inactivity in power sector culminated into negative sentiment of investors, i.e. private sector and lenders, towards investment in power projects. Banks like SBI who had huge exposure to such loans are suffering till date. This negative outlook discouraged businesses from investing in power assets, thereby hampering growth of GDP and per capita income, reducing job creation possibilities and causing a dent to Human development Index.

Similarly, in case of Vodafone tax dispute, the uncertainty over taxation resulted in creation of an unfavorable image of India as an investment destination in international markets. It constricted FDI flows in Indian market and resulted in widening Current Account deficit and disturbing our balance of payments.

Delayed decisions often lead to reduction in growth opportunities for eg. obstructions in industrial development of cities on behalf of decade old land disputes. Also it leads to unproductive government, public or private spending for eg. Government expenditure of public money on prisoners who are detainees under trial, spending by public and private sector on court proceedings, lawyer’s fees etc. In some instances, it has even lead to closing down of small businesses and increase in crime rate.

Thus, we can conclude that inefficiencies in judicial process have the ability to hamper growth of India’s economy. So, it is imperative to bring in operational efficiencies in India’s judicial system by taking steps as small as administrative