India Cannot Be an Investment Power Without Accountability

By
Ravi Saini 
Associate Editor, Unique Times &
CEO, RSW (Resetting Sustainable
Wealth) Group

India wants to be the world’s next investment powerhouse. It speaks of scale, digital infrastructure, manufacturing strength, and policy ambition. Yet beneath the optimism lies a structural discomfort that serious global investors quietly recognise:

India has strong tax laws—but weak accountability in how those laws are enforced.

This is not a technical flaw. It is a strategic vulnerability. Until this gap is addressed, India will continue to attract attention, but not always conviction.

The Private Sector Carries the Nation—But Bears the Risk Alone

Let us be candid.

The real burden of building the Indian economy lies on the private sector:

• It creates jobs
• It drives innovation
• It fuels tax revenues
• It absorbs economic shocks

And yet, when the system falters, it is this very sector that is:

• Dragged into prolonged litigation
• Exposed to arbitrary actions
• Forced to absorb financial and reputational damage

If India expects its entrepreneurs and global investors to carry the weight of economic growth, then the State must ensure that they are protected from institutional unpredictability.

At a larger level, India must also break free from external factors—global pressures, capital biases, and legacy perceptions—that have historically prevented it from claiming its rightful place in the global economic order. But that freedom will not come from policy slogans alone. It will come from internal strength—rooted in fairness, accountability, and trust.

Power Without Consequence Is the Core Problem

India’s tax administration framework grants extensive powers:

• Search and seizure
• Retrospective scrutiny
• Asset attachments
• Aggressive recovery measures

But when these powers are:

• Misused
• Applied excessively
• Executed negligently

There is little to no real consequence for the taxpayer:

• Delayed justice
• Locked capital
• Operational disruption

Even when vindicated, there is rarely compensation for the damage suffered. This is where India loses credibility—not in law, but in execution.

The Missing Link: The Law of Tort

The Law of Tort exists to answer one fundamental question:

What happens when the State is wrong?

In most advanced economies:

• The State can be held liable
• Officers can face consequences
• Compensation is meaningful and enforceable

In India’s tax ecosystem, this principle is largely absent in practice. The result is a dangerous imbalance:

Authority is real. Accountability is optional.

Judicial Signals Are Clear—But Not Enough

Courts, including the Delhi High Court, have begun to send strong signals:

• Imposing costs on erring officers
• Ordering timely refunds
• Criticising procedural violations

These are important developments—but they are reactive, not structural.

India cannot depend on the judiciary alone to correct what is fundamentally an administrative design failure.

Investor Reality: Trust Is Built on Protection, Not Promises

Global investors are not deterred by taxation.

They are deterred by uncertainty and lack of remedy. What they expect is simple:

✔ Fair enforcement
✔ Predictable outcomes
✔ Swift resolution
✔ Protection against wrongful state action

India risks being seen as:

“A market of opportunity—with a system of unpredictability.” That perception has a direct cost:

• Higher risk premiums
• Slower capital inflow
• Conservative investment strategies

A Structural Imbalance That Must Be Corrected

India’s current system creates a one-sided framework:

This is not sustainable for a nation aiming to lead the global economy.

What India Must Do—Decisively

Incremental reforms will not suffice. What is required is structural transformation.

1. Recognise Tortious Liability in Tax Administration

• Introduce clear provisions for compensation against wrongful actions
• Cover cases like:
• • Illegal reassessment
  • Unjustified asset seizure
  • Procedural violations

Without consequence, power will always be misused.

2. Establish an Independent Taxpayer Protection Authority

• Autonomous and empowered
• Fast-track grievance resolution
• Authority to award compensation

This must be a decision-making body—not advisory.

3. Enforce Real Accountability for Officers

• Penalise repeated or proven misconduct
• Introduce financial and career consequences
• Protect honest decision-making

Accountability must be targeted—not generalised.

4. Introduce Automatic Compensation Systems

• Delayed refunds → automatic interest + penalty
• Wrongful actions → predefined compensation

Justice delayed should not require another legal battle.

5. Digitize Governance Accountability

India has digitised compliance—now it must digitise responsibility:

• Track administrative decisions
• Create transparent audit trails
• Use technology to flag misuse

The system must monitor itself, not just taxpayers.

Breaking Free from Constraints—Internal and External

India often attributes its slower global rise to:

• External economic pressures
• Geopolitical shifts
• Global capital biases

But the deeper constraint is internal inconsistency. To achieve its rightful global standing, India must:

• Eliminate institutional unpredictability
• Strengthen legal accountability
• Build investor trust at scale

Global recognition does not come from ambition—it comes from credibility.

Conclusion: Accountability Is the New Economic Reform

India stands at a defining moment. If the private sector is expected to:

• Create millions of jobs
• Drive economic expansion
• Compete globally

Then the State must:

• Ensure fairness
• Guarantee accountability
• Protect against misuse of power

The integration of the Law of Tort into tax governance is not optional—it is foundational.

Because in the end, the real question is not:

“How strong are India’s laws?”

But:

“How fair is India when those laws are applied?”

The answer to that question will determine whether India becomes:

Just another large market…….. or a truly trusted global investment destination.

Pic Courtesy: pegasus/ images are subject to copyright