Sound judgment

EDITORIAL

As with its verdict in the Vodafone case two weeks ago, the Supreme Court’s latest decision to cancel all 2G licences will have a positive impact on the image of India as a place to do business. It will also help foreign investment flows in the long term. Those raising fears of loss of face and adverse investment climate ignore the fact that capital flows are directly proportional to the quality of governance and transparency of law. Even in the worst of times, the US has been attracting high inflows of foreign capital because it is seen as a place where laws are upheld and are not tinkered with to benefit a few influential business entities. Thursday’s decision on the 2G scam will certainly help investors with serious business plans who are disinterested in enriching themselves through the market capitalisation route take long-term call on the country. The decision demonstrates that investors can bank on the rule of law even when the executive fails to discharge its responsibilities. This was also the case a fortnight ago when nobody quite expected the apex court to overturn the lower court’s judgment in the disputed tax case in favour of Vodafone. Despite the huge loss to exchequer, the decision received all-round applause. This is what justice is all about. That the law should spare nobody. It is nobody’s case that the guilty should go unpunished just because a few billion dollars would go down the drain. Some voices have been raised about how the decision might impact telecom tariffs. This is facetious argument. It cannot be the Supreme Court’s brief to ensure that telecom tariffs do not go up because fewer players would be left in the fray once the licences are cancelled. Neither can the apex court be made accountable for saving the bottom lines of banks or any other corporate entity because its business would be adversely affected. Foreign investors who bought stakes in dubious telecom ventures should have done due diligence on their local partners before sinking their cash. There cannot be a case for foreign investments fleeing India if they have been callous in putting their capital at risk here. They certainly must answer their shareholders back home for pushing imprudent investment decision abroad. One cannot rule out the probability that some of the players who had invested in these joint ventures only did so because of lower valuations being offered in a lucrative sector. If they have to pay up for their indiscretions now, so be it. The Rajarathnam-Rajat Gupta insider trading charges show corruption is big business in the world’s biggest economies as well. But the guilty there cannot go unpunished. Hopefully, all that is now set to change here soon.