Law and the Economy in India: Before Independence and After
By Tirthankar Roy & Anand V. Swamy
HarperCollins, pages, Rs. 799

Law matters for economic development, but where does it come from? And through what mechanisms does it affect different parts of the economy?

In this insightful volume Tirthankar Roy and Anand V. Swamy start in the late eighteenth century, tracing the evolution of the British-Indian legal system as it emerged in the service of a cautious and self-serving colonial regime, offering, for the first time a unique perspective on the challenges of today.

Authors, Tirthankar Roy and Anand V. Swamy, say, “Most Indians view India’s legal system as dysfunctional, and suspect its colonial roots are to blame for this. But where did colonial-era law come from, and how much has it persisted after independence? We answer each of these questions, as it pertains to economic activity, in this two-books-in-one volume. The reader can pick a topic of interest, for instance labor law, and follow its history over 250 years, seeing its emergence in the service of colonial rule as well as its modification in pursuit of economic development after independence.”

Roy is professor of economic history at the London School of Economics and Political Science. He is the author of ‘The Economic History of India, 1857–2010’, ‘The East India Company: The World’s Most Powerful Corporation’, ‘The Crafts and Capitalism: Handloom Weaving Industry in Colonial India’ and co-author of ‘The Economic History of Colonialism’. Swamy is Professor of Economics at Williams College, USA, where he is also associated with the Center for Development Economics.

Here is an excerpt from the book:

Environmental Law
Judiciary Takes Center Stage

We have seen that in relation to rights in land, the law goes back a very long way. In contrast, much of environmental law has emerged in the last few decades. Courts have been unusually important in interpreting the law and even in implementation to the point where they have been accused of violating the separation of powers between the legislature, the executive branch, and the judiciary. How has this come to be, and what are the potential consequences? We address these questions in this chapter.

As we have seen in chapter 4, there was important colonial-era legislation in some areas of environmental law. However, after independence, industrialization, urbanization, and population growth have made environmental issues—pollution being a prominent example—far more salient. The problem of pollution illustrates one of the biggest challenges facing environmental law and governance. There is, to begin with, the classic problem of the divergence between private and social cost. For instance, the benefits of operating a factory accrue largely to the employer and the workers, whereas the effect of the factory pouring sewage into a river may be borne by users faraway downstream. In principle, the government could require the factory to treat the sewage before it is released, or in an extreme case close the factory. But governments respond to the pressure of constituents. There is then the problem of organizing collective action by constituents. If the factory is closed, the losses will be felt intensely by the owner and the workers, whereas the benefits will spread across river users over a large area, each of whom will benefit to only a modest extent. It is likely that the pressure to keep the factory open will be more organized and intense than the opposition to it.

Moreover, the costs of closing the factory (especially in terms of job losses) will be felt immediately, before the next election, whereas the benefits, such as better health of water users downstream, may be long term. Inaction may be the government’s politically expedient option. Finally, even if a law is passed requiring factories to treat sewage before releasing it, they have to be inspected to verify that they are obeying the law. This creates opportunities for corruption. This is a particularly relevant matter in India, with its history of “license-permit Raj.” Competition between states (provinces) also plays a role. States compete for capital and infrastructure and are ready to relax forest and pollution law.

All this creates an opening for the courts. Supreme Court judges don’t face elections and can make decisions based on a comprehensive analysis of social costs and benefits. This can, in principle, make judges better decision makers than legislatures. They can also compel (or at least instruct) governments to enforce the law. Of course, for this to happen, environmental problems have to be brought to the attention of the courts, which are not set up to govern. Also, the intervention of courts is constrained by the Constitution. In India both these constraints on the courts have been eased since the late 1970s. After the end of the Emergency, during which the Supreme Court had sullied its reputation by kowtowing to the executive, it was now ready to play a more progressive and activist role. The Supreme Court relaxed rules about locus standi, the right to approach a court. A concerned citizen not directly affected by the problem at hand was permitted to file a petition. Moreover, this could be done in a highly informal way, perhaps even with a postcard. This allowed an explosion of Public Interest Litigation (PIL). While PIL is a means for improving citizens’ access to justice, it has also greatly enhanced the court’s ability to use its discretion to intervene in public policy, a more controversial outcome.

The Supreme Court was able to respond forcefully to this PIL because of a fundamental change in its interpretation of Article 21, the Right to Life in the Indian Constitution. The text of article 21 merely says that “No person shall be deprived of his life or personal liberty except according to procedure established by law.” This was a conservative formulation, highlighting what the government could not do. Moreover, the Constituent Assembly had avoided the term due process, which carries the implication that a procedure established by law needs to be substantively fair. This changed after the famous Maneka Gandhi v. Union of India, a case involving denial of a passport. The court decided that the implications of Article 21 had to be considered jointly with those of Article 14 (equal protection under the law) and Article 19 (which guaranteed various freedoms, including the right to pursue an occupation). As a legal scholar has said, the court’s interpretation gave a “visa” to the notion of due process, which had hitherto been left out. It also opened the door for the right to life to be interpreted as involving human dignity more broadly rather than as just physical existence. This permitted a series of landmark judgments in which citizens’ rights to a healthy environment were recognized, and a whole body of environmental law developed. The court also took it upon itself to ensure that justice was actually done on the ground. Much more than before, it involved itself in the enforcement of its decisions.

The legislature was not entirely passive. There was one impetus to act on the environmental front: visible and dramatic disasters. In such situations, the status quo was no longer politically advantageous, and the legislatures acted. The Bhopal gas tragedy, which we discuss below, is perhaps the most prominent example of a disaster motivating legislation. In tracing the evolution of environmental law, to retain focus, we primarily discuss only two major issues—forest conservation and pollution.

[The excerpt reproduced with the permission of the publishers.]