Efficient Contract Enforcement Would Brighten India's Prospects

We must regain momentum on assuring everyone access to reliable mechanisms for the resolution of commercial disputes

- ASHISH DHAWAN & AMRITA AGARWAL

Globally, efficient contract enforcement is a prerequisite for economic competitiveness. In India's case, conservative estimates suggest that legal uncertainty and procedural delays impose a direct cost of 1.5-2% of GDP each year. But the deeper wound comes from the opportunity cost—estimated to be two to three times greater—related to deferred investments. This acts as a hidden tax on enterprises.

Economies like the US and China that have enjoyed high investment and growth have made deliberate efforts to improve their dispute resolution systems. For example, the US has large-scale and specialized arbitration institutions. The US Supreme Court takes a pro-arbitration stance, supported by the Federal Arbitration Act, and its enforcement of arbitral awards is efficient. Also, the court system focuses on building specialized expertise in the judiciary. States like New York and Delaware operate commercial divisions staffed by dedicated expert judges and backed by effective case management systems. Lastly, cross-border disputes are enforced under the New York convention and the US also has a specialized commercial court for international disputes.