Cases pendency hitting India’s economic growth

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NEW DELHI: The Economic Survey has made an attempt for the first time to study the backlog of cases in courts which it said is affecting India’s economic activity. The study, which captured government projects in six infrastructure ministries to the tune of Rs 52,000 crore currently stayed by court injunctions, said they had likely cost enhancement of up to 60% during the period of pendency.

The hardest hit are the ministries of power, roads and railways. “Since project costs were predominantly debt-financed, it is likely that project costs have increased by close to 60% given the average duration of stay,” the survey noted. The study has substantiated its claims through data collected from the State Bank of India.

Despite India jumping 30 places in the World Bank’s ease of doing business last year, the economic survey has pointed out that the backlog of cases in courts is not only affecting economic activity but also making a huge dent on the finances of companies.

The illustrative example of six infrastructure ministries does not include other central or state government projects that are similarly stalled by court injunctions, nor past projects.

“Pendency of economic cases are high and mounting in the Supreme Court, high courts, Tribunals and tax department, which is taking a severe toll on the economy in terms of stalled projects, mounting legal costs, contested tax revenues and reduced investment,” the Survey observed.

Creation of tribunals, which have seen a 25% increase in the size of unresolved cases, have not helped reduce pendency in high courts. While the average pendency across tribunals is 3.8 years, it is 4.3 years in high courts.

“The Supreme Court has less capacity to deal with economic cases because of rising overall pendency,” it said. The other reason being the SC has increasingly been admitting more special leave petitions, which empowers any party to approach it directly. Initially SLPs were invoked only in “exceptional circumstances” now they have increased from around 25% in 2008 to nearly 40% in 2016.

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