Justice delayed is markets stymied

Justice delayed is markets stymied

News: The article discusses the robustness of India’s democratic institutions and their need to grow with growing demands.

Facts:

• Since the 1991 economic reforms, India has improved tremendously in almost all economic indicators.
• Various economic policies, like IBC Code, and tax reforms, like GST, have enabled the economy to move faster than ever before.
• But India’s institutions, like the judicial system, though having strong roots, have simply failed to grow with the growing population and with increasing demands.

Growing importance of judiciary:

• Three things are crucial for efficient functioning of a market economy:
• Transparency in information
• Efficient dispute settlements
• Contract enforcement in a time-bound manner powered by an effective judiciary.
• In a market economy, the government has little role to play in transactions among players but it plays an effective role by setting up efficient dispute settlement mechanisms, so that the costs of transactions are minimal.
• In such an economy, the judiciary plays the pivotal role by enforcing contracts in the case of disputes through minimal costs.
• Economic Survey 2017-18 noted that the current working capacity of the High Courts and the Supreme Court is only 63.6% and there are huge numbers of pending cases.
• In 2017, India spent about ₹0.24 per person on the judiciary and the U.S. spent ₹12.
• Low focus on judiciary implies that not following contracts is not costly in India as players are willing to bypass the system by paying rents to government officials.

Way forward:

• There is a major role of institutions in facilitating market exchange by reducing transaction costs and providing a predictable framework for exchange.
• Strengthening institutions and political power enjoyed by the incumbent are in conflict of interest. Thus, the Opposition also has a major role to play in the solidification of institutions, including the judiciary.