India’s well-developed legal system and strong rule of law are integral in stimulating and maintaining economic growth, writes Minister of Law HR Bhardwaj
India, the seventh largest country by geographical area and next to only China in population, is most importantly the largest liberal democracy in the world. The Indian democracy thrives on three pillars: Legislature, executive and the judiciary. Of the three an independent and active judiciary is the main bulwark which has developed and sustained the unique character of India’s democracy.
The driving force of the judiciary in India is the rule of law. The rule of law is the principle which ensures that governmental authority is legitimately exercised only in accordance with written, publicly disclosed laws adopted and enforced in accordance with established procedure. This principle is intended to be a safeguard against arbitrary governance and has been, to a large extent, responsible for the independence of the Indian judiciary.
The Supreme Court of India has held that in our constitutional system the central and most characteristic feature is the concept of the rule of law, which means that the authority of the law courts is to test all administrative action by the standard of legality.
In India one can and does see the judicial system taking issue with failures of the legislature and the executive to the extent that the courts very often strike down state and central laws that are unjustified or violate fundamental rights of Indian citizens.
A strong and an independent judiciary definitely plays an important role in propelling the economy of a country. An inactive, weak and government-dependent judiciary leads to more contract breaches, discourages companies from undertaking relationship-specific investments, impedes access to formal financial institutions and favours inefficient parties. The negative implications of having an inefficient and weak judiciary are large.
The role of the judiciary and it being bound by the rule of law has become all the more relevant in the post-liberalization scenario in India.
Until 1991 India adhered to a quasi-socialist approach with strict government control over private sector participation, foreign trade and foreign direct investment. However, since 1991, India has gradually opened up its markets through economic reforms and reduced government controls on foreign trade and investment. Privatization of publicly-owned companies and the opening of certain sectors to private and foreign participation have continued amid political debate.
The Indian economy has grown steadily over the last two decades with a GDP growth rate of consistently above 8%. The Indian economy is among the fastest growing in the world.
Liberalization and globalization come with their own peculiar problems and prejudices. But the rule of law in India has helped build the confidence of foreign investors and business in India as these foreign entities are assured of a level playing field – in the courts and in regards to statutory clearances or general conduct of business of foreign entities that have their set-ups in India, be it a joint venture company, a 100% subsidiary or a franchisee.
In fact there are several instances when the Indian courts have held against the government in matters where foreign corporates or individuals are involved. Foreign business houses and companies feel comfortable in investing in India and many of these companies willingly agree to make Indian laws the governing laws of their contracts. At several international conferences, delegations that come to see me have told me in applauding terms that it is the rule of law and the democratic set-up of the country that gives such investors a huge degree of comfort.
Courts in India are the last resort of a beleaguered citizen. People in India are sure that they will be heard and even the poorest of the poor do not hesitate to approach the courts to assert their rights. The courts have become the custodians of the rights of the people of India and in that way the courts act as a safety valve against possible uprisings and coups. Courts ensure that there is peace in the country with minimum infighting and any investor would want to invest in a country which is a safe haven for industry.
Therefore the Indian courts not only ensure that contractual obligations are honoured and equality is maintained amongst all but they also ensure a safe climate that induces companies to come and invest in India.
Rule of law, independent judiciary and a thriving and growing economy prevail.
India beckons.
The Honourable HR Bhardwaj is India’s Minister of Law
