An essential aspect of a nation's growth is the ease with which investment and business are conducted in society. Investments and businesses create jobs, increase the quantum of taxes, and enrich society.
This requires streamlined bureaucratic processes, quick decision-making with the appropriate consultations, and speedy resolution of live issues as and when they arise. A nation cannot afford to have a backwards-looking decision-making process, or one that seeks to control all the stakeholders in the process. The system needs an open, consultative, and democratic approach where the constituents convene, discuss the challenges, and propose solutions — then appraised by the administration and converted into policy.
The government and administration's roles are to ensure that decisions and policies are inclusive, forward-looking, empower the citizens, and benefit the whole society, and not any one section.
Decision-making must also ensure that decisions do not promote greater government control. The government cannot create wealth or jobs; that is the ambit of the private sector. India is a free country governed by the rule of law. The government’s control and management is inefficient, as seen in Air India’s case, and will impoverish the nation.
The asymmetry of knowledge between government and citizens leads to fear among the government and administration that giving more power to the citizens will limit their role as the custodians of governance. It must be remembered that in a democracy, the ultimate objective is the welfare of all citizens, which demands that the government and the administration take decisions that further the same in an environment of freedom and greater competition.
Today, it is evident across India that wherever bureaucratic control exists and oversight has increased, a failure occurs because a few easily capture the system. The license quota raj, set up by the government from Independence till the 1991 economic liberalisation, overly controlled businesses and entrepreneurs, and had the government run the economy's commanding heights. The entire system actively suppressed private capital, restricted job creation and investment, stunted economic growth, and was ultimately captured by crony capitalists for their gain. While economic liberalisation has enabled the nation to move away from the failures of the license raj, vestiges of this system remain.
As India looks forward towards 100 years of Independence, every state must ensure a complete clean-up of its administrative processes so that the socio-economic welfare of citizens is the guiding principle of all levels of government. While the Union government has liberalised many areas, the state governments are yet to undertake this exercise. State governments must collect the knowledge collateral, the ability to view existing processes differently, and the ability to bring together a large number of constituents to consult and develop policies and strategies that respond to the needs of citizens today, over the next 25 years, and beyond. Apart from welfare, these needs include increasing business efficiency, investments, and large-scale job creation.
The next stage of reforms must necessarily be in the states with a speedier disposition of policy matters and greater socio-economic empowerment of citizens. Of course, minimal government oversight is necessary to ensure that undue monopolisation does not occur, nor exploitation of citizens by any business entity. Today, India has a regulatory system which has demonstrated results.
The biggest failure of our democracy over the last 75 years has been the justice system. Today the nation has 21 judges/million population, barely up from 14 in the 1950s, despite the cases going up manifold, and an increasing number of people awaiting trial. The Supreme Court has many cases running with significant delays, the high courts even more so, and the lower courts beat both. Many cases are stuck up in the court system, which has inevitably led to the worst consequences for poorer sections of society. Nearly 250,000 under-trials are in Indian jails waiting for their time in court, and they constitute 2/3rds of the total prison population. They are yet to be released despite Supreme Court orders. A lack of justice asymmetrically affects the poorest sections of society, and must be resolved urgently.
We also see many economic cases go to court to settle disputes, and get stuck for a long time. In India, an activist judiciary at various levels has assigned to itself the right to make decisions on issues like the environment. Public emotions and sentiments are used to obscure the issues, leading to inordinately lengthy deliberations with disastrous economic consequences. An example is the escalation of the Narmada dam issue, both in cost and denial of the benefits of water to large parts of Gujarat's population. The case took a long time to resolve because of the politicking by the NGOs and excessive activism for personal gain. Allegedly illegal mining cases are another example where mining is abruptly banned first. Then judicial committees are set up, which take a long time to deliberate and resolve, with utter disregard for depriving many people, often daily labour, of employment.
Every time a court decides on a significant economic matter, it must be ensured that courts complete deliberations within a reasonable timeframe. Economic costs of excessive delays affect the economy, taxpayers, and the working population dependent on the matter under dispute. Similarly, investigative agencies such as the CBI and the ED must also be time-bound so cases are not dragged on for a long time, hurting the image of the investigated and that of India.
Even in tax cases, the number of disputes has doubled over the past few years, vast sums of money have been stuck up, and court decisions are not forthcoming in a reasonable period. This has created tax uncertainty, increased the sums of money locked up by the government, and increased India's risk premium in international business. For this reason, India does poorly on various rankings like the Ease of Doing Business (EoDB).
It is also true that in many dispute cases, the industry takes the easy way out and approaches the court to get a stay on economic matters, delaying the resolution. Even in the bankruptcy court, we see longer delays than when Parliament first enacted the law. Economic issues must be decided speedily, with certainty and with the judiciary's focus. An activist judiciary which always seeks to further the fundamental rights of citizens could also further economic progress; it needs a delicate balance between the two.
The judiciary must ensure there is adequate expert knowledge on the matter available. Without specialist knowledge, disastrous decisions are made with immediate consequences. For example, when higher courts made the grant of telecom licenses illegal overnight, people who had spent legitimate money obtaining those licenses incurred significant losses. There have been too many cases recently where the courts have reversed decisions taken by the government, which most observers say were in the government's ambit.
To accelerate job creation, expand the tax base, and eradicate poverty in an emerging country, India needs world-class processes and adequate judicial and administrative capacity with the necessary knowledge collateral. As demonstrated by SEBI in its policy-making or the IT ministry for the data laws, consultation with stakeholders is a requisite. The courts' speedy resolution of economic and tax disputes will improve India's EoDB. Reforms that place the citizens' welfare at the centre and restore respect for taxpayer money and citizens' time will be a welcome feat as India marches towards 100 years of Independence.
TV Mohandas Pai is Chairman, Aarin Capital Partners, and Nisha Holla is Technology Fellow, C-CAMP. Views are personal, and do not represent the stand of this publication.