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JUDICIAL PENDENCY – CAUSING 2% ANNUAL LOSS IN GDP GROWTH YEAR AFTER YEAR
- Outrageously Yours
- Mar 4
- 2 min read
"Judicial pendency is not only causing economic losses that impact GDP, but is also significantly contributing to the decay of moral fabric. The purpose of this note is to raise this concern at the highest level so that the Government of India initiates remedial actions."
2% annual loss to the GDP is significant and overcoming this loss is critical to achieving Developed Country Status by 2047. What we have put together is not precise quantification given the complex nature of judicial delays. However, it is an informed breakdown of how does judicial pendency impacts India's GDP directly or indirectly.
Business uncertainty and investment delays: 0.7-1.0%. This likely represents one of the larger impacts as it affects both domestic and foreign investment decisions directly.
Locked capital in pending cases: 4.0-5.0% Studies have suggested that resources worth approximately 4-5% of GDP are tied up in pending litigation, though not all of this would translate to immediate GDP growth if resolved.
Higher transaction costs: 0.3-0.5% These costs affect businesses across sectors but vary significantly by industry.
Reduced lending and credit availability: 0.5-0.8% This impacts capital formation and growth financing, particularly for SMEs.
Property rights inefficiencies: 0.6-0.9% Land and property disputes significantly impact construction, real estate, and infrastructure development.
Corporate governance issues: 0.4-0.6% Slow bankruptcy proceedings and corporate litigation delay resource reallocation.
Reduced tax revenue: 0.3-0.5% Tax litigation ties up government resources that could fund development.
Reduced trust in institutions: 0.2-0.4% While harder to quantify, this has long-term effects on economic behaviour.
In total, these factors might contribute to a loss of approximately 7-9% of potential GDP. This estimate aligns with studies suggesting that judicial reforms could add 1-2 percentage points to annual GDP growth, which would compound significantly over time.