"CRITICAL ANALYSIS OF ECONOMIC DEVELOPMENT AND INCLUSIVE LEGAL SYSTEM"
Aashi Rajvaidya
BA.LL.B. 1st Year, S & S Law College, Indore
Abstract- Modern social theory has focused on the relationship between the legal system and progress. This paper investigates whether the legal system intended our economic development. The premise that a better legal system will assist promote economic growth, which will in turn build constituencies for democratic reforms, is a staple of development policy literature. However, empirically demonstrating causal links between the judiciary and political liberalization has been challenging. Legal reforms that are narrowly focused on improving the enforcement of property rights and contract law may be beneficial to increased trade and investment, but we still don't have a lot of information on those links.
Our findings indicate that countries have actively reformed their legal systems, In this research, we have mentioned some such laws and some acts that the government has introduced. Even after introducing it, somewhere our economy is not on the right way of development. It seems that improvements in these legal rules are not sufficient Conditions for that. Finally, we perform an exploratory investigation on government reforms and the gap between those reforms and economic development.
Keywords: Economic development, Legal sector, Acts, Role of legal system.
1 INTRODUCTION
What is a strong economy? Firstly a strong economy implies: A high rate of economic growth. International development organizations and there is general agreement among commentators that a central function of the state is to create and enforce the law and this supports the growth and development of the economy. Economic development usually means embracing new technologies, the transition from agriculture - based on industry to the economy and an overall improvement of living standards. If the legal system is adhered to, then the nation is on an upward trajectory in economic growth and development.
A prosperous market economy requires strong, independent justice institutions and a legal framework which can enforce contracts and protect rights. One of the most efficient rules of interaction is the "law". The relationship between the legal institutions and economic development has interested the academic fraternity for far too long, across the globe. But this is not happening in India properly. Economics is the main factor affecting the community, whether positively or negatively. The close link between laws and the economy retains the position of states, both domestically and internationally. Enforcing laws is good for economic growth. It creates stability and incentivizes investment. The superior laws are a key factor for stable, broad-based economic growth. With a growing number of growth opportunities, particularly in developing economies, companies seek to explore the latest dynamics and trends that are positively impacting them. They also have to examine those and other issues within the limits permitted under the Act. In order to develop the economy appropriately we need to include such legal system which will help to boost our economy.
2. THE ROLE OF LEGAL SYSTEM IN ECONOMIC DEVELOPMENT
Economic development refers to programs, policies or activities designed to enhance the economic well-being and quality of life of a community. Whereas economic development is a policy intervention endeavor with aims of economic and convivial celebrity of people, economic magnification is a phenomenon of market productivity and ascends in GDP.
The legal sector is generally in a state of transformation and is constantly re- energizing. The role of the law, which is very important in economic life, has to do with the ability to influence the level of certainty among human beings in society.
Government introduced many such laws and acts which helped our economy to grow.
2.1 Foreign Exchange Management Act,(1999)
Its best example is FEMA. The central government has enacted payments and cross- border trade into India known as the Foreign Exchange Management Act. FEMA (Foreign Exchange Management Act) was introduced in 1999 to replace the earlier FERA (Foreign Exchange Regulation Act). FEMA has been formulated to fill all gaps and disadvantages of FERA (Foreign Exchange Regulation Act) and thus several economic reforms have been introduced under FEMA act.
Foreign Exchange Management Act was essentially introduced to de-regularize and have a liberal economy in India. The primary purpose of the introduction of FEMA in India was to facilitate foreign trade and payments.
In addition, FEMA has also been formulated to help economic development and maintain the India forex market. This act describes the formalities and procedures for the negotiation of all foreign exchange operations in India. Due to this systematic way of foreign exchange, there was an increase in foreign investments, there was a huge reduction in the size of black money and it also inspired competition against Indian finance. Overall FEMA (foreign exchange management act) has played a huge role in the development of the economy.
2.2 Monopolistic and Restrictive Trade Practice (MRTP Act, 1969) and Competition Act, 2002
The Monopolies and Restrictive Trade Practices Act, 1969 (in short, MRTP Act) came into force with effect from 1st June, 1970. It was enacted to ensure the concentration of economic power in the hands of the few rich. The act was there to prohibit monopolistic and restrictive trade practices. It extended to all of India except Jammu & Kashmir. The main objectives of this act are to control monopolies and monopolistic trade practices, to prevent the concentration of economic power in a few hands and to regulate restrictive trade practices. The 1969 Monopoly and Restricting Trade Practice Act has become obsolete in today's fierce competitive world. The MRTP Act prohibits the expansion of companies with assets of 100 crores, because these companies must obtain permission from the government to grow their business. So there was a desperate need to shift our attention from monopoly to competition, and that's why a new law was proclaimed and gazette of India on 14 January 2003 for driving competition to Indian market. It was the Competition Act 2002.
Under this legislation, the Competition Commission of India was established to prevent the activities that have an adverse effect on competition in India . This act also extends to whole of India except Jammu and Kashmir. The main objectives of the Competition Act, 2002 are: to provide the framework for the establishment of the Competition Commission. to prevent monopolies and to promote competition in the market.
to protect the freedom of trade for the participating individuals and entities in the market.
The Competition Act 2002 as amended by the Competition (Amendment) Act 2007,follows the philosophy of modern competition . Due to this Act , In the recent years the Indian economy has been one of the best performers and is on a high growth path. Infusion of higher degree of competition can play a catalytic role in unlocking the fuller growth potential in many critical areas of the economy. Competition has the potential to foster economic growth and development through improved economic efficiency and minimizing waste in producing goods and services. As a result, the market is more capable of rapidly reallocating resources, improving productivity and achieving a higher level of economic growth. Hence this act is also a big reason in the development of the economy.
2.3 Consumer Protection Act, 2019
On July 20, 2020, the new Consumer Protection Act, 2019 entered into force in India, replacing the old Consumer Protection Act, 1986.The new Act reshapes the administration and settlement of consumer disputes in India. It includes strict penalties, including jail for adultery and false advertising. It will empower consumers and help them to protect their rights under its various rules and provisions. The new Consumer Protection Act, 2019 came into force on July 20, 2020 and will empower consumers and help safeguard their rights.
The new Act will be swift and shorter than the old Consumer Protection Act, whose unique access to justice has been granted, making this an extensive exercise. This act has many advantages –
1. Consumers are protected against the marketing of goods and services which are hazardous to life and property.
2. Consumer sovereignty in the choice of goods is guaranteed.
3. Consumers are entitled to a speedy, simple, and inexpensive relief under the act.
4. The redressal machinery is available within easy reach to the consumers.
5. The authorities under the act are made responsible for the protection of certain rights.
They are the right to safety, right to choose, right to be heard and right to consumer education. This is enabling legislation and is aimed to be progressive.
6. The penalties under the Act helps to check arbitrary trade practices in India. Also, it helps in mutual trust in the consumption of goods and services in a consumption- based economy like India.
7. The Act has proposed provisions for product liability. If the product is under defect, then the service provider has to repay the consumer. A manufacturer or a service provider has to compensate a consumer if the goods/services cause injury or damage to the consumer. This might be due to a manufacturing defect or poor service. This allows for compensation to an injured consumer.
Hence the CONSUMER PROTECTION ACT 2019 is a progressive, welfare legislation that ultimately benefits the consumers of India. It also plays an important role for the economy, as consumption spending increases the country's economic growth.
2.4 Population Control Bill, 2019
Population Regulation bill 2019 is a bill put forward in the Rajya Sabha in july 2019 by Rakesh Sinha. This bill is aimed at controlling India's population. On February 7, 2020, the 2020 draft Constitution (Amendment) was introduced in the Rajya Sabha by Anil Desai, a member of Parliament for Shiv Sena. The 2020 draft bill proposes to introduce a two child policy per couple and aims to encourage it's adoption through a variety of measures such as educational benefits, limited taxes, loans, free healthcare and better employment opportunities.
According to Thomas Malthus, population growth would reduce long-term living standards. The theory was straightforward: since there is a fixed amount of land, population growth will eventually reduce the amount of resources that each individual can consume, ultimately causing illness, hunger and war.
Nonetheless, its fundamental view is that population growth is a potential threat to economic development. Remained an influential and enlightened international development policy program, particularly during the 1950s and 1960s- a period marked by unprecedented population growth in many developing countries.
Due to the limited resources in the economy, The Population control bill 2019 and its amendment helped a lot in developing our economy.
2.5 Right of Children to Free and Compulsory Education Act, 2009
The Right to Education Act (RTE) is an Act of the Parliament of India enacted on 4 August 2009, and came into effect on 1 st April 2010. Which describes how free and compulsory education matters to children between the ages 6 and 15 in India under Article 21 A of the Indian Constitution. This act imposed a legal obligation on the state and central governments to respect the fundamental rights of a child. (In accordance with section 21 A of the constitution)The act sets out a specific standard for student- teacher ratio, which is a very important concept for providing quality education. The RTE is the result of the 86 the Amendment's subsequent legislation. Essentially, this Act ensures that all children from economically disadvantaged families receive free elementary education. The Act makes it explicit that the term "compulsory education" refers to the government's commitment to assure the admission, attendance, and completion of primary school for children aged six to fourteen. The term "free" denotes that the child will not be charged any fees that will prevent him or her from completing the education.
There are several advantages of this act:
1. It ensures that all children aged 6 to 14 receive a free and compulsory education.
2. A child is not required to pay any school fees, capitation fees, charges, or expenses in order to receive an elementary education.
3. No screening procedure for school admission is to be used on the child or his parents.
4. Special training is provided for children beyond the age of six who have not been admitted to any school or who are unable to continue their studies, in order to bring them up to speed with their peers and to be placed in an age-appropriate class. In such instances, the youngster can complete his or her basic education beyond the age of 14.
5. Additionally, each child is entitled to free textbooks, writing materials, and uniform.
6. The state government must assure the creation of study courses, admittance of children, teaching staff, school infrastructure development, and the completion of education for children up to the age of 14, as well as the inclusion of children from marginalised groups.
7. The school has to ensure all round development of the child and practice inclusion without denying admission to any child on any grounds.
The Right to Education Act, 2009 established a comprehensive standard for schools and authorities to follow in order to create a conducive learning environment. However, we frequently hear reports of malpractices and inadequate RTE implementation. People's understanding of themselves and the world is enriched by education. Education improves people's productivity and creativity, as well as encouraging entrepreneurship and technological advancements. Furthermore, it is critical for ensuring economic and social progress as well as increasing income distribution.
According to the findings a 10% increase in secondary education leads to a 1.5 percent boost in economic growth, while a 10% increase in tertiary education leads to a 0.9 percent rise in economic growth, ceteris paribus. 23rd Aug, 2019.
Hence education has an important influence in economic development: People's access to modern and scientific ideas improves as a result of education. It improves people's efficiency and their capacity to absorb new technology. It raises knowledge. Therefore, This act made by the Parliament has played a very important role in economic growth and development.
2.6 Goods and Services Tax
The Goods and Service Tax Act was passed by Parliament on March 29, 2017 and into effect on July 1, 2017. To put it another way, the Goods and Service Tax (GST) is a tax that is levied on the provision of goods and services. GST will streamline India's tax structure, increase the tax base, and create a single market for all states. This will result in greater compliance, which will help India's GDP grow. It will benefit India Inc. since the average tax burden on businesses will be decreased as a result of the transparent set-off mechanism and elimination of cascading taxes, resulting in lower production costs and greater export competitiveness. In the growing economic context, introducing a GST to replace the existing numerous tax systems of the Centre and State taxes is not only desirable, but also necessary. Services are increasingly being utilised or consumed in the manufacture and distribution of commodities, and vice versa. Separate taxation of goods and services frequently necessitates the division of transaction values into products and services for taxation, resulting in increased complexities, administrative, and compliance expenses. It would be conceivable to offer full credit for input taxes collected if multiple taxes were integrated into a GST system. Because GST is a destination-based consumption tax based on the VAT principle, it will considerably aid in the removal of economic distortions and the establishment of a shared national market. India's taxation on products and services has been characterised as a cascading and distortionary tax on output, resulting in resource misallocation, poorer productivity, and slower economic growth. But After GST, growth of the Indian economy and the rise of GST collection are both positively associated. The Goods and Services Tax (GST) is a massive indirect tax framework designed to promote and enhance a country's economic growth.
How will GST impact the Indian Economy?
● Simplifying the tax structure: This reduces the tax burden on producers while also promoting growth through increased production. The existing tax structure, which
is riddled with loopholes, prohibits manufacturers from operating at full capacity and slows growth. The GST will solve this problem by giving producers a tax credit.
● Pan has been improved. India operations: Various tax barriers, like as checkpoints and toll plazas, result in the squandering of perishable goods being transported.
Due to higher buffer stock requirements and warehousing expenses, this penalty translates into significant costs. This stumbling barrier will be removed by a single taxation system.
● Transparency in the GST system: The system will be more transparent since customers will know exactly how much tax they will be charged and on what basis they would be taxed.
● Increased revenue: By broadening the tax base, the GST will increase government revenue.
● Encouragement of production: GST will provide credit for taxes paid by manufacturers in the products or services chain, promoting production. This is planned to encourage producers to purchase raw materials from a variety of registered dealers, and it is envisaged that more vendors and suppliers will be brought under taxation's jurisdiction.
● Increased Exports: The GST will eliminate customs charges on exports. Because transaction costs are lower, the country's competitiveness in overseas markets will improve.
The greatest benefit will come in the form of a lower overall tax burden on products and services for the end user. GST will make Indian products more competitive on both the domestic and foreign markets. Last but not the least, because of its transparency, the GST will be easier to administer. The suggested taxation scheme, if implemented, shows significant promise for the Indian economy's long-term growth.
As we have seen above, such a legal system has greatly assisted the economic development of India, however, As we know that our economy is still not developing so well, then the government should Introduce some more effective legal system which will lead to our economic growth.
3. CONCLUSION
In The "Declaration of Delhi," issued in 1959, the International Commission of Jurists stated that the legal system "should be utilised to defend and enhance the individual's civil and political rights" and to establish" conditions under which his rightful aspirations and dignity may be fulfilled." This, I feel, still holds true today and should be ingrained in all of our institutional and social principles in order for our country to achieve national cohesion and economic prosperity. It is undeniable that a country with a robust legal and regulatory framework has a greater GDP and per capita income. The purpose of this research is to compare and contrast the impact of legal development on India's economic development consolidating our If we are to emerge as a major global economic force, legal institutions must be prioritised. Despite the formation of so many legal systems by the government, the economic development in our India is still backward. As we have seen, FEMA was replaced by FERA because FERA was not effective so well. But it still has many disadvantages, such as FEMA not being involved in the community planning process, and public participation is invited only as long as the public is used to assisting in the identification of hazards and as prescribed, lack of guidelines.1) what hazards to consider, (2) disaster risk, and (3) vulnerability. Therefore, The Monopolies and Restrictive Trade Practices Act, 1969 and Consumer Protection Act 2019 both these acts played their great role in economic development. But The Population Control bill 2019 has both positive and negative impact on our economic development because there is an interference with freedom and human rights, Ethical concerns, Religious concerns, frustration Introduction implies large financial burden for one generation, and it has directly negative impacts on economic development . In the end as we saw that still economic development is not happening in our country, our government will have to bring such an effective legal system which will develop our economy better.
REFERENCES
1. Sub-section 1 of section 7 of competition act 2002 2. The monopolies and restrictive trade practices act 1969.
3. The population control bill 2019 , www.wikipedia.com 4. http://taxguru.in
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8. Alesina and Perotti.1994 A. Alesina, R. Perotti, The political economy of growth: a critical survey of the recent literature.
9. The World Bank Economic Review, 8 (3) (1994)
