Judicial decisions have impacted govt revenues

The drive to transform India into a global industrial powerhouse in recent years has witnessed numerous economic reforms, including the scrapping of several archaic laws, simplifying rules and decriminalising several offences.

Yet, creating a genuinely business-friendly environment which generates confidence among domestic and foreign investors still calls for much work, including taking a closer look at various judicial decisions.

To discuss the issue of how judgments by the Supreme Court, the High Courts and various Green Tribunals have adversely impacted the Indian economy, Policy Circle organised a webinar on August 31 with four experts. Such decisions not only resulted in reduced GDP growth, a rise in non-performing assets of banks, and job losses but also created uncertainty among the investors.

Pradeep S. Mehta, Secretary-General of Consumer Unity and Trust Society (CUTS) International, the first speaker at the webinar, said that the government had lost nearly Rs 8,000 crore from mid-2018 to mid-2021, affecting the livelihood of almost one lakh workers directly or indirectly. It resulted from five significant environment-related judgements passed by the Supreme Court and National Green Tribunal.

“The closure of Sterlite Copper Smelter in Thoothkudi, Tamil Nadu, because of allegations of air pollution had resulted in total economic losses of Rs 14,794 crore and direct job losses of 30,000 employees,” he said and argued that environmental-related disputes and delays in enforcement of contracts and closure of cases hurt domestic and foreign investors, resulting in job losses and rising non-performing assets in banks.

Speaking at the webinar, Badri Narayanan Gopalkrishnan, Head, Trade, Commerce and Strategic Economic Dialogue, NITI Aayog, suggested that judges should take the help of external advisors or experts to understand the economic and commercial implications and macroeconomic parameters.

He maintained that the judiciary mostly plays its safe and often ignores the economic repercussions of its judgements, which have a ripple effect on the country.

“Such judgements have a risk effect in terms of job losses, job creation, growth in gross domestic product and the potential for domestic and foreign investments.”

Mehta also argues the need for courts to conduct a cost-benefit analysis of the projects by a committee of experts before taking their decisions. After all, livelihood issues of workers, small vendors and suppliers are at stake. Setting up a committee of advisors to provide a holistic picture of a case is already available to the court under the Constitution.

Sunil Kumar Sinha, Principal Economist and Director, Public Finance at India Ratings and Research, maintains that it is time to find alternate ways to resolve disputes among different contracting parties, ensuring that these disputes do not reach the courts. He emphasised the need for setting up commercial courts to resolve conflicts faster and ensure that domestic and foreign investors could have greater confidence in investing in India.

Despite all the challenges, Sinha added that “foreign direct investments would continue to pour into the country because of the sheer size of the domestic market and the country’s demographic dividend. India’s ability to attract global investment is much higher than its neighbours like China, Indonesia.”

“In cases related to IPR, patents, and drug pricing, courts should look at the business case instead of going with the public interest,” says Krishna.

She believes that bringing back the tribunals would help prevent delays and getting early closures of cases.

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