'Law and the Economy in India' explores rationale behind key regulations

Law and the Economy in India: Before Independence and After

Author:  Tirthankar Roy & Anand V Swamy

Publisher:  HarperCollins

Pages:  584

Price: Rs 799

For an economy to function optimally, participants must be certain of the outcomes — that the counterparty will perform its part, the wealth that one generates will remain with the creator, and that legal systems will ensure these. These attributes are a sine qua non for economic progress. Yet, as far back as 1793, Governor General Cornwallis rued that the “growing backlog of suits struck at the very root of the prosperity of the country”.

Law and the Economy in India  traces the rationale, expedience and compulsions behind the evolution of key regulations that govern economic activity in the country. Part 1, covering the colonial period, is mostly on the development of laws relating to factors of production — land and property rights, labour and enterprises.

Land laws dominate the first part. With five major schools of Hindu Law, 34 compilations of these laws and a cobweb of practices specific to regions or religious sectors, it is a wonder that India has a common set of laws. The book skillfully walks us through the issues on land ownership, transfer rights, tenancy, occupancy rights, tax collection, registration, wills, joint property matters, and so on. It is interesting to learn, for instance, that the societal restraints on widow re-marriage had more to do with the question of property right inheritance rather than any religious rule.

Labour laws have been more about protection and securing labour for European companies and less about workers’ rights. For instance, contract laws emerged from the need to ensure timely supplies of indigo leaves for the dye factories of European converters. The Companies Act was the result of flawed fusion between Western notions of enterprise and the prevailing rainbow of indigenous institutions. Although the book focuses on the economic rationale behind the evolution of laws, it highlights many ironies that foreshadow the mess that is India’s legal system. It turns out that inadequate staffing, delays and pendency are not a post-colonial Indian innovation. To illustrate:

> As far back as 1773, there were just 250 judicial staffers for a population of 20 million in Bengal, a far worse ratio than today.

> It took 18 years to decide a payment of one year’s rental by a tenant to an inamdar  (a feudal landholder) for keeping his tenancy rights (in the Madras Presidency).

> The Indian Succession Act that was introduced in 1865 was applicable to all properties other than those owned by Hindus and Muslims — a great illustration of vacuous law making.

> The law abolishing slavery was originally mooted in 1807, discussed in 1833 when the East India Company charter was renewed, passed in 1843 but became a punishable offence only in 1860.

> By one account in 1872,  63 to 71 per cent of decrees became infructuous by the time they were even pronounced at mofussil courts.

Modern-day victims stuck in the law courts would be interested to know that laws are not often (perhaps never) about justice. They are an expedient, delicate balance between what is saleable and fear of political and social backlash, even by the British who had no vote banks in India.

The second part of the book covers laws enacted post-Independence, ranging from wildlife protection to patents, the Emergency to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and from triple talaq to insolvency. The run-up to most regulations should be familiar to the readers. If colonisation and extraction was the theme before Independence, it was self-administration till 1990 and globalisation after that. Law-making has been more about the might of the state being downsized from its colonial overreach and integrating with global context.Even so, anomalies abound. Land rights are yet to find a balance between growth and owners’ rights, tribal protection and collective rights over forests. It is ironic that the Reserve Bank of India’s expert committee on rural credit in the 1930s decided that moneylenders were the bane and institutional credit through credit co-operatives and banking outreach were the remedy. But in 2015, the crime records bureau shows that out of 3,097 debt-related farmer suicides, 80 per cent  were customers of institutional credit and just 302 (10 per cent) had taken loans from “rapacious” moneylenders.

The authors’ contention that corporate and contract law are by-products of judicial activism is probably more applicable to environmental laws of recent origin. It is good to see labour laws move away from ensuring supplies of indigo for colonial factories to ensuring livelihoods through such legislation as MGNREGA and for street vendors.

The book rightly expresses reservations over diminishing concerns over equity after the 1970s, rising costs, the overreach of judicial and civil society outfits, and how they overwhelmingly sideline the victims’ right to timely justice over the wrongdoers’ infinite rubber band of fundamental rights.

Overall, the depth of discussion on the economic linkages and laws are not examined in as much detail to justify the use of the noun “Economy” in the title. But the depth of research and engaging prose make the book accessible to readers with a non-legal background. It is certainly enlightening about the origins of some of India’s more inscrutable laws and the even more intriguing implementation of them. At any rate, the book should be made a compulsory read for all journalists, not least because common knowledge of facts and basic laws and their evolution may reduce the acrimony in our rather obnoxious public debates.

The reviewer is author of Making Growth Happen in India