Economic reforms and the law

REMOVING STRUCTURAL HURDLES should necessarily precede the changes planned for India's economy to move into the second stage of its reforms. Notwithstanding the amendments already made to economic legislation, much more remains to be done. Reforming many of the existing laws - those that took effect to support state-led economic growth - will call for changes that go beyond mere legislative purposes. They would have to encompass the range of issues involved, and take proper note of the linkages between law and economic activity. Simply put, the magnitude of changes required touch upon the basic factors of production: land, labour, capital and organisation. Sweeping reforms such as these will necessarily have to be approached in a measured manner, and should secure the advantage of as broad a consensus as possible. The tardy progress on this important front is reflective of both the lack of a political oneness on the need for such measures and, in a related manner, the continued inability of the proponents of reform to convince the people on the need to move away from the status quo.

While the decade of economic reforms saw a plethora of groups making recommendations on changes required in several sectors of the economy, the progress card does not show much satisfaction. Attempts to change the more sensitive laws have either been deferred or have found themselves held up in procedures. An oft- cited hurdle to attracting more foreign direct investment has been the legal structure and changing this is bound to be more difficult within a democratic framework. Nonetheless, the changes required will have to be made taking into account the sensitivities involved. The amendments proposed to the country's labour laws and those that have been called for in land ceiling laws are cases in point where stiff opposition will have to be overcome. One area not lacking in expertise is in making recommendations and carrying out studies. The task now is to convince the nation's legislators that these changes will have to be made. While the thinking behind amending the Indian laws relating to economic activity is to bring them on a par with international laws, it is also important that domestic issues are not forgotten. With the country moving to a situation where efficiency will decide economic survival, social issues cannot be ignored. The difficult balance between facilitating efficiency and protecting social concerns will have to be struck. If a broad reason is to be identified for the slow progress in changing economic laws, it is the inability to strike this ideal balance. The argument for changes in land laws to bring in more efficient farm practices is a pointer to the difficulties that would have to be encountered and the social changes that could result from such changes.

Against this backdrop of conflicting interests, the Union Government's thinking to constitute a separate economic law commission should not result in a mere ornamental addition to the existing body of expertise. As the failure to proceed with these amendments is largely on account of political reluctance based on possible adverse implications to society, an approach that helps to allay such fears and seeks out the elusive consensus is an appropriate as well as an urgent necessity. Unless the commission is conceived of as an instrument that can bring about a broader political consensus and social agreement it will have little meaning. At best it could be a message to the developed world that the country remains committed to broad economic reform, howsoever sluggish the progress may have been till now.

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