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Law and Capitalism in India

Since the wake of globalization and the subsequent liberalization of the economy, the economic structure of India has undergone a paradigm shift. Especially post-independence and post-partition, India’s economic system has become quite haphazard as compared to the developed countries around the world. As a developing country, there has been tremendous development in terms of industrialization and trade, although the growth has not been homogenous across the country. As a result, there has been a huge disparity in terms of wealth of its people. Consequently, it is quite common in India for people to witness luxury alongside poverty. There are people enjoying luxury on one hand and on the other end, people are witnessing constant hunger, lack of access to health facilities and similar challenges in the course of life. This irony is evidently visible in Mumbai where Mr. Mukesh Ambani’s $2 billion home (Antilla) overlooks the largest slum in Asia (Dharavi).

According to Jacob (2011), capitalism is responsible for the improvement of economies to a significant extent, for it is often argued that what is beneficial for large corporations is also beneficial for the national economy. However, in their effort to inflate the gross domestic production by considering the enhancement of the wealth, economic structures have time and again tried to cover up the true picture of poverty. Alan Hunt, in his article Law, State and Class Struggle (1976), maintains that the law plays a crucial role to maintain and legitimize the class domination that sustains the wealth gap. In the light of this understanding, the present essay contends that in India, law has a major stake in fostering state-regulated capitalism and thus, law and capitalism put together significantly affect the society in terms of economy and class structure. 

The distinctive feature of legal systems of a class-dominated society is that it is governed by the material interests of the ruling class. Hence, the present legal framework of such societies fails to secure the interests of the mass, representing them as a community in general. However, social scientists, especially Marxist scholars, have not adequately explored the role of law in the society. And therefore, the contribution of law to maintain capitalist societies have also gone unnoticed to a great extent. According to Deakin, the success of capitalism in the Western societies relies on the development of a general national legal system pertaining to legal enforceability. Nonetheless it was a time-consuming process. Given the poor legal framework due to inaccessibility, expensiveness and rampant corruption in many of the developing nations, it is evident that law enforcement lacks the effectiveness. Considering the absence of a strong legal system, trade and commerce in various developing economies run on the basis of family ties, shared identities depending on ethnicity or religion, bureaucratic co-option and even corruption. 

In the context of India, this might be considered as the root of the problem in many aspects of law and capitalism. The corrupt and weak legal structure of the country, along with the inaccessible legal resource that might otherwise be helpful to the common populace, enable capitalist patronization of the wealth gap even more. For example, several national banks in India have been suffering due to the violation of terms and contracts by wealthy consumers like Vijay Mallya, Nirav Modi, Mehul Chowksi etc. to name a few, who have utilized the loopholes of the law to declare themselves as bankrupt and thus have evaded their debts. They did not only refuse to repay their debts, but eventually have escaped the country for good, therefore, rendering the national legal system unable to hold them accountable. However, the burden of such crime will ultimately have to be borne by the national economy and in turn, by the common tax-payers. However, the existing legal system has failed to restrict such deviances and secure people’s interest. Indirectly, it is serving the rich instead of the people who are actually in need.  

Similarly, there are several other legal loopholes and lack of law enforcement that have fostered the capitalist exploitation of the society till date. For example, by ratifying the fundamental right to education through the Sarva Sikhsha Abhiyan, the Indian constitution has promised more than 125 million children under the age of 14 free and compulsory education after 70 long years of independence. Also, the Indian constitution has the provision of restraining bonded labour and child labour system vide Article 23, which ensures the protection of the fundamental right against exploitation. Yet, as of today, bonded child labourers are being exploited in several sectors, including textile, agriculture, weaving, matches and fireworks, tobacco, constructions, stone quarries and local eateries. Similarly, the gender-based wage gap, racial and cast-based discriminations and manipulating rural population due to their lack of education and awareness is practiced rampantly around the country, only to aid the capitalist economy further.

The capitalists are not limited in manipulating the loopholes of the legal systems in India, but they are also successfully controlling the government to a significant extent. The capitalist funding of election campaigns, as well as timely patronization of political parties, have held the political system hostage to their benefit. Out of gratitude to their capitalist sponsors perhaps, the political rhetoric of the country has become subject to corporate approval. Majority of the state, as well as the national government, taking up right-to-center standpoints is glaring evidence of this claim. Subsequently, the affiliation restricts national taxation policies to serve the cause of social justice and welfare, creating new opportunities for the large corporates to exploit the economy further. Thus, it becomes a vicious cycle, where legislation and law enforcement are crippled by capitalism, and in turn, enables capitalism to maintain the wealth gap.

To conclude, it can be asserted that the only way to evade this vicious cycle is to enforce a regulated capitalism. Economic structures of a nation should combine the efficacy of capitalism with the socialistic ideals of justice and equity. And it will be possible if and only if national governments take proactive roles. In this regard, the only tool to regulate capitalist forces is a more stringent legislative framework, coupled with stricter law enforcement procedures. 


Gaurav Yashas is a third year B.A L.L.B (Hons) student at Jindal Global Law School.

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