Modi has the mandate to resist the Supreme Court.

Modi's Black-Money Blunder

Dhiraj Nayyar is a journalist in New Delhi. Trained as an economist, he has worked at the Financial Express, India Today and Firstpost.com. He is editor of "Surviving the Storm: India and the Global Financial Crisis."
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Indian Prime Minister Narendra Modi is a man more accustomed to giving than to following orders. But part of him was probably relieved earlier this week when India's Supreme Court directed him to hand over the names of 627 Indian citizens holding potentially illegal bank accounts at an HSBC branch in Geneva. As a candidate, Modi had promised to expose and repatriate any "black money" squirreled away abroad. As prime minister, he has discovered that existing tax agreements prevent him from publicizing the names of account-holders unless the government can prove criminality or tax evasion in the sources of funds.

By obeying the Supreme Court -- handing over the list of names in a sealed envelope -- Modi has evaded the awkward possibility that he might himself have to expose well-heeled donors to his own Bharatiya Janata Party. Any short-term political gain, however, cannot make up for the continued, slow erosion of executive authority in India by an activist Supreme Court.

Investigating potentially illicit bank accounts should be the domain of the executive -- in particular, the Income Tax department. Instead, a court-appointed investigative team, which includes two retired Supreme Court judges, will now take up the Geneva case. Indian judges have no expertise in investigation. The judiciary's role is and should be to interpret and enforce the law of the land.

The Court has been expanding its authority for over a decade now. Back in 2002, it ordered the Delhi city government to ensure that all public transport switched to using environmentally friendly compressed natural gas rather than diesel or petrol. The decision was wildly popular, encouraging judges to go further.

The previous Congress-led government paid a heavy price for failing to defend its policymaking turf. In 2012, the Supreme Court canceled 122 telecom licenses that had been given out in 2008. Certainly, the first-come-first-serve policy of doling out the licenses had been flawed, and there were disturbing allegations of corruption. But should the Supreme Court have declared the entire policy void without a single conviction against any policymaker or businessman for wrongdoing?

Judges ruled that natural resources should instead be allocated using auctions. That may have been a smart policy choice, but it wasn't the court's to make. The fact that government decision-making may be flawed or downright incompetent -- something Indians are all too familiar with -- doesn't mean that unelected judges have a right to intervene in policy.

More recently, the Supreme Court canceled the allocations of more than 200 coal mines because it deemed the process by which they'd been handed out non-transparent, discretionary and illegal. If that were the case, then surely those in government who set the policy should have been punished. Yet despite the fact that no official, minister or businessman has been convicted of bribery in relation to the case, the whole system has been overturned.

The fact is that the Supreme Court has been able to cross over into the executive's turf because past governments have either been unsure of their decisions, made them in bad faith, been unable to implement them properly, or been unable to defend them once made. With his massive popular mandate, Modi has the democratic credibility to put the judges back in their place. Giving in this week may have seemed easy. If he wants the freedom to implement his policies as he sees fit, though, it's not a precedent Modi should repeat.

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To contact the author on this story:
Dhiraj Nayyar at dhiraj.nayyar@gmail.com

To contact the editors on this story:
Nisid Hajari at nhajari@bloomberg.net
Nisid Hajari at nhajari@bloomberg.net