Justice Delayed: The Cost to India's Economy

 The sources suggest that the judicial system's slowness and inefficiency are a root cause of much of India's economic stagnation, holding far-reaching consequences that make it impossible to efficiently run a business. The negative impact is comparable to low-end estimates of the effect of climate change, costing India at least 10% of its GDP every year.

The dimensions of judicial inefficiency are numerous and span institutional capacity, judicial procedure, and resource allocation:

Dimensions of Judicial Inefficiency

1. Institutional Capacity and Resource Scarcity:

• Massive Backlog: There are at least 50 million cases pending, and the Supreme Court alone has 69,000 cases piled up, with 18,000 of those pending for over thirty years.
• Time Required to Clear Cases: In 2018, it was estimated that at current capacity, it would take 324 years to clear all pending cases. Since that time, the number of pending cases has doubled.
• Low Judge-to-Population Ratio: India has one of the lowest ratios globally, with only 21 judges for every million people. This is starkly contrasted with the EU average of 200 per million and the US average of 150 per million.
• Underfunding: India spends only 0.1% of its GDP on the justice system, which is a small proportion, especially considering that providing the rule of law requires high fixed costs.
• Unfilled Vacancies: A significant number of positions remain unstaffed because the high judges who appoint them meet infrequently. In November of the preceding year, there were 5,600 unfilled vacancies, including two in the Supreme Court and 350 in the High Courts. This problem is compounded by the fact that the average length of a vacancy is eight months.

2. Procedural and Structural Failures:

• Excessive Dilatory Procedures: The system is described as being excessively dilatory due to its formalistic inheritance from the British system. The judiciary is "far too generous" to absent lawyers, failing to require timeliness or dismiss cases.
• Judicial Non-Assertiveness: Judges often agree to requests for extensions and delays made by the side that benefits from wasted time, rather than punishing the lawyers or dismissing the case. This lack of assertiveness allows everyone to exploit the process. An example is given of a case that required a man to appear in court every few months for a decade simply to have his attendance taken and receive a new court date.
• Prolixity: Indian judges and lawyers are noted for notorious prolixity, resulting in preposterously long opinions. For example, the case State vs Jayalalitha resulted in a 570-page opinion (with 552 paragraphs).
• Lack of Urgency: Fundamentally, the judiciary lacks urgency and fails to recognize the damage it has done to India.
• Corruption and Nepotism (Commentary): Judges are alleged to be corrupt, with heavy wads of cash recently found at a judge in the High Court of Delhi. Furthermore, judges choose their own successors, leading to "extreme amounts of nepotism".

Impact of India's Slow Judicial System

The sluggish judicial system profoundly affects business operations, economic growth, and the personal lives of citizens:

1. Economic Consequences and Misallocation:

• Stunted Firm Growth: Firms in India grow far more slowly than those in the United States. While a 40-year-old plant in the US employs seven times as many workers as a new plant, in India, they grow by barely 50%.
• Resource Misallocation: The most productive firms are too small, and the least productive firms are too large. Studies consistently find serious misallocation of resources. Research indicates that simply making every court system similar to the least congested systems would raise productivity by 4%.
• Stifled Competition: The inability to rely on the courts prevents multinationals from operating effectively in India. Since multinationals are typically more productive and bring better management practices, preventing their entry ultimately worsens the management of domestic firms.

2. Impact on Business Practices and Management:

• Inability to Resolve Disputes: Firms cannot efficiently resolve disputes through the courts, forcing them to rely on extrajudicial methods, most commonly keeping the business within the family.
• Poor Management Quality: Because owners fear expropriation by managers and have no timely legal recourse if fraud occurs, they cannot delegate decision-making. This reliance on family members means that firm size is strongly predicted by the number of male family members, not productivity or profitability. Owners are unable to trust their managers and therefore fail to implement better practices, such as "writing down what types of yarn you have and how much" or scheduling machine repairs.
• Labor Rigidity: Slow courts increase the cost of firing workers, which prevents productive businesses from expanding. Firms hold back from hiring employees because they fear being "saddled" with them if the business faces an adverse shock. This contributes to firms being the wrong sizes. A famous example is the Bharat Forge Co Ltd v. Uttam Manohar Nakate case, where a worker found asleep on duty in 1983 was ultimately dismissed by the Supreme Court only in 2005—an example of "Justice delayed is justice denied".

3. Societal and Personal Costs:

• Harassment and Delay: Cases often take more than a decade to be disposed of, and the laggard rate of disposal means laws are often used for harassment. Individuals who are inevitably found not guilty must still visit courts for many years.
• Constrained Lives: People's careers languish because they are unable to migrate while cases are pending, as they still must show up at their local courthouse. If the case is registered far away, they are forced to visit courthouses potentially "a thousand miles away".
• Contract Enforcement: Enforcing contracts is described as "a joke" unless you are a Multinational Corporation (MNC) with the necessary financial power.
• Family Breakdown: Even family matters drag on and are used as weapons to tear families apart.

The judicial system's decay is presented as a major impediment to India's development, overriding other potential positive factors. The fundamental lack of timely recourse acts like a national economic anchor, preventing specialized division of labor and forcing businesses to rely on internal, less efficient, family-based structures instead of trusting external professional systems.

The sources highlight that the slowness and inefficiency of India's judicial system are the root cause of much of the nation's economic stagnation, holding far-reaching consequences that make it virtually impossible to efficiently run a business. This decay is significant enough to override all other positive factors regarding India's potential rise. The estimated cost of this judicial system failure is staggering, costing India at least 10% of its GDP every year.

The key consequences for business and the economy detailed in the sources are:

1. Inability to Resolve Disputes and Lack of Trust

The inability of firms to resolve disputes through the courts forces them to turn to extrajudicial methods, most commonly keeping the business within the family. For all firms surveyed in a comprehensive census of textile mills near Mumbai, every single one was family-run.

2. Stunted Firm Growth and Resource Misallocation

The broken court system leads directly to poor firm growth and massive misallocation of resources across the economy:

• Slow Growth: Firms in India grow far more slowly compared to those in the United States. A 40-year-old plant in the US employs seven times as many workers as a new plant, but in India, plants only grow by barely 50% over the same period.
• Misallocation: Resources are severely misallocated within industries: the most productive firms are too small, and the least productive firms are too large. Studies consistently find serious misallocation. Researchers estimate that simply making every court system similar to the least congested systems would raise productivity by 4%.
• Productivity Gap: The gap in average revenue product between the most and least productive plants is five to six times higher in India than in the United States.

3. Poor Management and Inability to Delegate

Because firms cannot rely on the courts to be a timely check on fraud, owners fear expropriation by managers and cannot delegate decision-making. This reliance on internal family structures means:

• Family Predicts Size: The single strongest predictor of firm size is simply the number of male family members in the family, not factors like productivity, revenue, or profitability.
• No Professional Management: Decision-making is done almost entirely by the owners, and middle managers are not free or incentivized to introduce improvements. This results in the failure to implement extremely simple, profitable management interventions, such as "write down what types of yarn you have and how much" or "have a schedule for repairing machines".

4. Labor Market Rigidity

Slow courts increase the cost of firing workers, which prevents productive businesses from expanding.

• Hiring Hesitation: Firms hold back from hiring employees because they fear they will be "saddled" with them if the business faces an adverse shock.
• Firing Difficulty: To fire workers for economic reasons, firms must obtain permission from the local government and eventually the court system. This leads to firms being the wrong sizes. The extreme nature of these delays is highlighted by the Bharat Forge Co Ltd v. Uttam Manohar Nakate case, where a worker caught asleep on duty in 1983 was ultimately dismissed by the Supreme Court only in 2005.

5. Hindrance of Outside Competition and Investment

The judicial system stifles outside competition, particularly from multinational corporations (MNCs).

• MNC Dependence on Courts: Since MNCs do not have family members to employ, they must rely upon the court system to enforce their decisions.
• Worse Domestic Management: Because MNCs are generally more productive and bring better management practices, preventing their entry makes the management of domestic firms worse.
• Contract Enforcement: Enforcing contracts is considered "a joke," with only MNCs able to do so due to the financial power necessary.

Ultimately, the judicial system's failure to provide timely recourse forces businesses to rely on less efficient, family-based structures instead of trusting external professional systems, preventing the specialization of labor and severely limiting India's economic potential. The inability to enforce contracts and resolve disputes efficiently acts like an economic anchor, fundamentally limiting growth and productivity across all sectors.

The sources identify several underlying structural and procedural causes for the extreme delays and inefficiency in India's judicial system, which, in the larger context of the Impact of India's Slow Judicial System, is responsible for economic stagnation and pervasive resource misallocation. This inefficiency costs India at least 10% of its GDP every year.

Underlying Causes of Delays

The underlying causes of the delays stem from three main areas: resource deprivation, procedural failures, and institutional bottlenecks:

1. Severe Resource Deprivation and Understaffing

The fundamental issue is that India does not spend enough on its judicial system and fails to adequately staff it.

• Low Funding: India spends only 0.1% of its GDP on the justice system. Providing the rule of law requires high fixed costs, and this low expenditure contributes to inefficiency.
• Judge Shortage: India has one of the lowest ratios of judges to population globally, with only 21 judges for every million people. This is significantly lower than the EU average of 200 per million and the US average of 150 per million. While the government has previously planned to raise this ratio (e.g., to 50 per million in 2002), these goals have historically been unmet.
• Unfilled Vacancies: Positions often remain unstaffed because the high judges who appoint them meet infrequently. In November of the preceding year, there were 5,600 unfilled vacancies, including 350 in the High Courts. The average length of a vacancy is 8 months.

2. Procedural and Institutional Failures

The system's procedural rules and judicial behavior actively promote delay:

• Excessively Dilatory Procedures: The court procedure is characterized as "excessively dilatory". As a descendant of the British system, it is a formalistic legal system robustly associated with legal procedures taking a longer time.
• Lack of Judicial Assertiveness: The judiciary is described as "far too generous to lawyers who are absent," failing to require timeliness or dismiss cases. Judges often agree to requests for extensions and delays made by the side that benefits from wasted time, rather than punishing the lawyers or dismissing the case entirely. This lack of urgency allows "everyone to exploit the process".
• Prolixity: Indian judges and lawyers are noted for their "notorious prolixity," routinely producing "preposterously long opinions". This wastes court time; for example, the State vs Jayalalitha case resulted in a 570-page opinion.
• Lack of Urgency: Fundamentally, the judiciary lacks urgency and does not recognize the significant damage it has inflicted upon India.

3. Institutional Corruption and Nepotism (User Commentary)

Comments in the sources allege severe systemic issues related to integrity and appointments:

• Corruption: Judges are alleged to be corrupt, exemplified by heavy wads of cash recently found at a judge in the High Court of Delhi.
• Nepotism in Succession: Judges choose their own successors, resulting in "extreme amounts of nepotism". The judicial system has resisted attempts by Parliament to reform this process, claiming it is unconstitutional.

Context of Impact

These underlying causes result in a massive and growing backlog of cases—at least 50 million pending, with the Supreme Court having 69,000 piled up. This backlog means that, at the capacity estimated in 2018 (when pending cases were half what they are now), it would have taken 324 years to clear all cases.

The consequence of these delays is that firms cannot rely on the courts to enforce contracts or resolve disputes efficiently, forcing them to rely on family members and leading to poor management, stunted growth, and serious misallocation of resources across the economy. The system's slowness is so pervasive that laws are often used merely for harassment, forcing citizens to visit courts for years even when they are eventually found not guilty. The judicial system's decay is considered a major black mark and the one threat to India's rise that overrides all other positive factors.

The issue is comparable to trying to run a highly specialized factory where the machines keep breaking down, but the repair service (the courts) takes decades to arrive, forcing the owner to only hire family members who can fix the machines with makeshift tools, preventing professionalization and efficient growth.

The sources, in the context of the devastating impact of India's slow judicial system—which costs the country at least 10% of its GDP every year and overrides all other positive economic factors—offer several specific proposals for necessary judicial reforms. The fundamental goal of these reforms is to address the severe backlog and procedural inefficiencies that cause resource misallocation, stunted firm growth, and poor management practices.

The suggested reforms focus on three key areas: increasing institutional capacity, implementing procedural restrictions, and re-evaluating the nature of judicial positions:

1. Increasing Institutional Capacity and Staffing

The primary proposed reform addresses the severe resource deprivation and low judge-to-population ratio (21 judges per million, compared to 150-200 per million in the US and EU):

• Mass Hiring and Reclassification: The sources suggest that the district courts should be made into the equivalent of a civil service position, and many more people should be hired. This would tackle the issue of numerous unfilled vacancies (5,600 vacancies, including 350 in the High Courts) and the overall shortage of judges.

2. Implementing Strict Procedural Restrictions

To combat the "excessively dilatory" procedures and the lack of judicial assertiveness that allow endless delays, specific procedural reforms are necessary:

• Limit on Adjournments: Courts should have a maximum number of adjournments or delays allowed.
• Rule Against Delinquent Parties: If the maximum allowed adjournments are exceeded, the court should rule against the delinquent side.
• Require Timeliness or Dismissal: The judiciary needs to require timeliness from lawyers and court attendees or else dismiss the case. This is essential because judges currently allow extensions and delays requested by the side that benefits from wasting time, rather than punishing the lawyers or dismissing the case.

3. Making Judicial Reform a National Priority

Beyond specific procedural changes, the overarching reform needed is a fundamental shift in the government's approach:

• Prioritization of Genuine Staffing Effort: India needs to make judicial reform a priority. This effort should not be part of a political power struggle but rather a genuine effort to staff the court. The sources emphasize that until India chooses to prioritize this, it cannot be expected to ascend to the level of development its people are capable of.
• Addressing Judicial Lack of Urgency: Fundamentally, the judiciary needs to recognize the damage it has done to India and act with a sense of urgency in the nation's best interests.

While one perspective mentioned in the sources suggests that some issues, such as the difficulty in firing employees, will be resolved by better legislation (more permissive legislation is allegedly on its way), this perspective acknowledges that there is "no antidote to the slowness of the judicial system" itself, reinforcing the need for direct judicial reforms. The current system, with its long case disposal times (often more than a decade), allows laws to be used as harassment and prevents contract enforcement, making these suggested reforms critical for freeing up economic potential.