14 May 2013

Much has been written and said about the Indian economy in the recent years. Indian economy has come a long way since the time economic reforms were launched just over a decade ago; thereby sustaining an annual average growth of over 6%. India is the seventh largest and second most populous country in the world. Its economy is the tenth largest in the world by nominal Gross Domestic Product (GDP) and third largest by purchasing power parity (PPP). Data just released by the International Monetary Fund (IMF) shows that India’s gross domestic product in purchasing power parity terms stood at $4.46 trillion in 2011, marginally higher than Japan’s $4.44 trillion, making it the third-biggest economy after the United States and China. It is also projected that surpassing China, India will become the world’s largest economy by 2050. As per the report, Indian economy will reach USD 85.97 trillion size by 2050, while the Chinese being USD 80.02 trillion during the same period. As of today, Indian foreign exchange reserves are nearly US$ 290 billion. From a food deficient country, India has moved to a self-sufficient one, and now is even exporting agricultural produce.

What is the role of law in relation to the economic change(s) brought about in a society governed by the rule of law? The notion and concept of `law and economic change’ ought to be understood in milieu of the coherent controls, the law applies on the fiscal/economic policies thereby steering its development. One need not forget that management of economy by law may be extensive or limited and passive but it has to have dual objectives and that is to attain certain social causes and economic development through the instrumentality of law, conducive to the situation. In other words, economic change and liberalization are intended to serve the purpose of efficiency.

Laws and reforms are inseparable, laws bring about reforms and reforms bring about newer laws. One cannot comprehend as to which of the two comes first. The process of liberalization entails creation of new ambience where some of our old laws get rendered either redundant or incompatible; and many more laws needing to be re-written. But, if the legal fabrication and handling processes are not geared up to the economic change that is sought to be brought about, the pace of economic change will get stifled; and consequently failing to achieve the preferred results. In a society governed by the rule of law, it is the law, which must ensure the proper framework in which the economic change can be brought about smoothly and without any abrasion. Law charged with basic values of life does play a vital and driving role in contribution towards social well being by bringing about social and economic change.

A prosperous society may be more concerned about piracy of the intellectual wealth. It may also show greater concern about environmental pollution that affect the quality of life or about adherence to the highest standards of competence, which a professional is expected to observe. Laws and legal systems, in this manner, codify social values, attitudes and expectations of behaviour from members of the society. They have their own impact; good as well as adverse, on the economic activity of the nation, depending on how far they are consistent with actual conduct, habits and thinking of the majority of members comprising the society. Certain laws, like income tax rates, customs duties, prohibition, etc. are known more for creating certain values in society, which ultimately act as deterrent in the larger interest of the society itself. Similarly, laws relating to economic activity can have different impacts, depending on what their content are. The reason is that ultimately, a law is an expression consisting of the intent of the law-makers and strategies to achieve this intent. The laws could become coercive, restrictive or highly facilitatory, depending on what the ideals have been accepted and how the drafting has been done. If the intent of the law and the contents of law are to facilitate growth in an unmistakable manner, law has to be drafted accordingly in an unambiguous manner.

Talking about liberalization, we are creating for ourselves new environments where some of our old laws have been rendered obsolete and many more laws need to be re-written. Liberalization is intended to serve the purpose of efficiency, namely, that whatever resources, are made available to us must be made most productive.

Since 1991, India has been continuously undergoing revolutionary fiscal and economic reforms and is undoubtedly moving away from the doctrine of State control, towards a free market economy. Permits, sanctions and controls are giving way to de-regulation, de- centralization, de-nationalization and disinvestment. The notorious restrictions of the past are being cleaned up by a popular will, which is driven with logical and legal mechanism.