The Supreme Court adds a new twist to India's retail liberalization drama!

Srikar points me to this attempt by the Indian Supreme Court to formulate foreign direct investment (FDI) policy. In response to a PIL claiming that the government's retail market liberalization policy violated the fundamental right of small traders, a two judge bench of the Court sought clarification from the government on the safeguards protecting the interests of small traders.

It's been four months since this happened. Have you got any investment which you were contemplating or is this just a political gimmick... Reforms is one part but the same should not close the doors of other traders... What are the checks in place to ensure that there is no obstruction to free trade, especially the small ones. Policy is not sacrosanct, we would also analyse it within the judicial parameters. Our exercise is very constitutional and limited to the constitutional principles... It's possible that a giant retailer might reduce the price of a commodity forcing the small retailers to shut shop. Once there is no competition, the retail giant can monopolise.

Now, this is clearly way beyond the Supreme Court's mandate and a classic example of judicial transgression into the realm of the legislature. What way is the judiciary concerned with the investments received? What evidence is there to show that retail liberalization will "close the doors of other traders"? What is "constitutional" about the promotion of free trade, especially among small traders? What way does the government's policy to liberalize retail trade infringe on the "basic features" of the constitution? What way are the interests of consumers (who gain by lower prices) inferior to that of the traders?

In fact, by raising these issues, the SC has waded into the debate about the dynamics of the free-market, with its inevitable distributional consequences. Since any trade policy measure will have losers and winners, will the judiciary always adjudicate on its distribution of costs and benefits? Is the SC competent, both legally and professionally, to examine such questions? By the same yardstick, it can tomorrow question the government's decision to lower or raise taxes on certain categories of people or regulate some economic activity on grounds of it violating or not promoting certain interests.

Stepping back, I have two observations.

1. This is symptomatic of the difficulty of getting any reform policy through in India. The issue of retail trade liberalization has been dissected in great detail by all and sundry for nearly two years now and, after following the due process, the government of the day has taken a well-considered policy decision which has been approved by the highest body of the country. In any functioning democracy, all debates should have ceased. Instead, we have more uncertainty. Judicial over-reach (sample the large numbers of cases involving land acquisition and environmental clearances that are stuck up in courts) is one of the most important contributors to the environment of uncertainty that characterizes any policy in India.

2. Finally, most importantly, it is amazing that an institution which is so chronically over-burdened and inefficient in the disposal of cases, gets swayed by populist urges and has the time to waste on matters where its locus standi is questionable. In fact, one of the reasons for the large scale pendency of litigation before the SC and other courts is the failure to exercise due diligence in screening cases. When your bandwidth is so severely constrained, it is plain obvious that some form of prioritization is the need of the hour.