Indian judicial crisis weighs on investor confidence
January 16 2018 11:18 PM

Indian legal system is already known for years-long delays and a backlog of more than 25mn cases. Amid serious allegations of graft and sexual harassment, with a sitting High Court judge even being jailed for contempt of court, controversies surrounding judges have blotted India’s higher judiciary on several occasions in the past.
Never before in the world’s largest democracy have sitting Supreme Court judges gone public with their differences. Four senior Supreme Court judges last Friday held a rare press briefing to speak out against the chief justice over his choices for judges to hear potentially sensitive cases, including one involving the death of a lower court justice.
India’s key equity gauges dropped as much as 0.5% after the judges addressed the media. A divided house in India’s top court also raises broader questions about the quality of the Indian legal system as it regularly rules on significant business and economic matters such as Vodafone Group’s years-long tax case.
Despite jumping 30 spots on the World Bank’s ease of doing business ranking, India remains 164th in the world for “enforcing contracts,” in part because of the subjective allotment of judges to cases, according to a Bloomberg report.
This isn’t the first sign of unease in the country’s top court. A prominent lawyer and judicial activist alleged late last year that the sitting chief justice, as well as his immediate predecessor, were hand-picking judges on cases that could have ended in investigations of the judges themselves. Throughout the last year, numerous Indian judges have been accused of impropriety. India’s Central Bureau of Investigation, the main federal investigative agency, arrested a retired High Court judge on charges of demanding bribes.
Indian Prime Minister Narendra Modi won a landslide victory in May 2014 riding on his promise of clean governance, after the previous Congress-led government was mired in a string of corruption scandals. But systemic corruption in India weighs heavily on economic growth. India’s ranking has averaged 75.32 from 1995 until 2016 – showing little improvement – according to Transparency International’s Corruption Perceptions Index.
Modi’s reform agenda has stalled of late due to a host of issues typical of the Indian polity. But India’s nearly $2.3tn, 60% consumer driven economy (one of the world’s 10 largest) offers great prospects for investors. The economy will expand 7.3% in fiscal year 2018, 7.7% in 2019 and 7.7% in 2020, according to a Bloomberg survey.
India’s judiciary, of late, has shown signs of conveniently merging with the dominant narrative in the country with “selective justice” just as a pro-business Modi is looking to market the world’s largest democracy as an investor-friendly destination. But an independent judiciary is one of the fundamentals of economic growth.
For sure, the comments made by the judges would raise questions about the credibility of India’s legal system, but they also should serve as a catalyst to embark on deep-rooted reforms to purge the judiciary.
Make no mistake, foreign investors are likely to closely follow how the current developments play out with huge implications for the investment prospects of India.

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