India's judicial system is in an "unbelievable mess" and requires urgent reform, according to former Planning Commission Deputy Chairman Montek Singh Ahluwalia. He emphasized that the central government has limited capacity to rectify the situation, suggesting that the Supreme Court might need to spearhead the necessary changes.
Ahluwalia, a key architect of India's 1991 economic reforms, highlighted the judicial system as a critical area alongside land and labour reforms essential for strengthening manufacturing and medium-sized industries. He expressed doubt that the Prime Minister's office could unilaterally resolve the deep-seated issues within the judiciary.
Judiciary: A Major Hurdle to Economic Growth
His sentiments echo those of Sanjeev Sanyal, a member of the Prime Minister's Economic Advisory Council (EAC), who last year called the judicial system the single biggest obstacle to India achieving its goal of becoming a developed economy (Viksit Bharat) within the next 20-25 years.
The scale of the problem is underscored by recent data. Union Minister of State for Law and Justice Arjun Ram Meghwal reported last month that 11,73,509 cases have been pending for over 20 years across the Supreme Court, High Courts, and district and subordinate courts, as of July 16, 2026. The Allahabad High Court alone accounts for 1,61,598 of these long-pending cases. Additionally, Supreme Court Justice MM Sundresh stated in April that a staggering 4.81 crore cases are pending nationwide.
Limited Progress on Labour Reforms
Regarding labour reforms, Ahluwalia noted that while the government has reduced the number of central labour laws from 27 to four, substantive changes have been minimal. He pointed out that a significant alteration, raising the threshold for government permission to reduce a company's workforce from 100 to 300, essentially reverts the law to its 1990 status, as the threshold had been lowered to 100 in 1980.
However, Ahluwalia credited the Centre for providing states with greater flexibility. Under the new framework, state governments can now raise this threshold beyond 300 if they deem it necessary to attract investment and enhance competitiveness. He urged states to leverage this autonomy, suggesting they could raise the threshold to 1,000 or even 5,000 workers to compete effectively with countries like Vietnam, Malaysia, and Indonesia for foreign investment.
Industry Urged to Lobby State Governments
The eminent economist also advised the industry to shift its lobbying efforts from the central government to state governments. He highlighted that state compliances account for half of the regulatory burden faced by businesses, making engagement at the state level crucial for fostering a more investor-friendly environment.