Why India should enforce contracts more efficiently
GS Paper 3: Effects of Liberalization on The Economy, Changes in Industrial Policy and their effects on Industrial Growth
Important For:
Prelims Exam: Ease of doing business
Mains Exam: Ease of Doing business: Reform taken and way forward
What is the Ease of Doing Business index?
• It is an index designed by the World Bank to rank 190 economies.
• A higher rank (closer to 1) means the country’s regulatory environment is favorable to business operations.
• The ranking is calculated on the basis of indicators such as:
o Starting a Business,
o Dealing with Construction Permits,
o Getting Electricity,
o Registering Property,
o Getting Credit,
o Protecting Minority Investors,
o Paying Taxes,
o Trading across Borders,
o Enforcing Contracts, and
o Resolving Insolvency.
• India was ranked 63rd in the overall index in 2020.
• World Bank has now discontinued the Doing Business index.
How is ‘Enforcing Contracts’ measured?
• In 2020, in the parameter of ‘Enforcing Contracts’, India was ranked 163rd, against 186th in 2015.
• The parameter considers time, cost and quality of the judicial process.
• Time considers the number of days to resolve a commercial dispute in courts; cost measures the expenses of attorney, courts and enforcement as a percentage of claim value;
• Quality considers the use of best practices which can promote efficiency and quality i.e., court proceedings, case management, alternative dispute resolution and court automation.
• Each of the three indicators have a 33.3% weightage.
What are some of the reforms undertaken?
• The Department of Justice, the nodal point for ‘Enforcing Contracts’ indicator along with the eCommittee of the Supreme Court, has undertaken a series of reforms.
• Some of the steps include:
o establishment of dedicated commercial courts with monetary jurisdiction up to ₹3 lakh,
o online case filing,
o e-payment of court fees,
o electronic case management,
o special courts for infrastructure project contracts,
o automatic and random allocation of commercial cases thereby eliminating human intervention
What further steps are required?
• An efficient judiciary instils confidence in investors and signals the commercial viability of transactions.
• The number of court hearings should be minimized too
• The judicial system should encourage out-of-court settlements through the respective lawyers as practised in advanced countries.
• It is equally important that the judiciary leaves matters relating to economic governance to governments.
How is India doing on this parameter now?
• At 163rd position in 2020, the country continues to struggle, with the time taken to resolve a commercial dispute being approximately 1,445 days in the Doing Business Report 2020.
• However, as of August 2022, law ministry data shows a marked improvement of close to 50% in days taken to resolve a dispute to 744 days in New Delhi and 626 days in Mumbai.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]