Economic Analysis of Amendments to the Indian Constitution A

202 Pages·2013·1.45 MB·English

by  Shruti Rajagopalan

Economic Analysis of Amendments to the Indian Constitution

A dissertation submitted in partial fulfillment of the requirements for the degree of
Doctor of Philosophy at George Mason University

By

Shruti Rajagopalan
Master in Law & Economics
University of Hamburg; Ghent University; University of Bologna, 2008
Bachelor of Laws
University of Delhi, 2007
Bachelor of Arts
University of Delhi, 2004

Director: Peter J Boettke, Professor
Department of Economics

Spring Semester 2013
George Mason University
Fairfax, VA
Copyright 2013 Shruti Rajagopalan
All Rights Reserved

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DEDICATION

I dedicate this work to my grandparents, Lalithambal and R Ramadurai, and Rukmini and
V Santhanam.

To my grand uncle, R Chandrachudan, who introduced me to the joy of reading.

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ACKNOWLEDGEMENTS

I must begin by thanking my family. My two living grandparents, Rukmini and V
Santhanam, paved the way for my life and career, with their sacrifices. Their spirit,
courage, and faith have made me the person I am today. My parents, Saraswati and
R Rajagopalan have supported me every step of the way. My mother is the strongest
woman I know and she has inspired me by always taking the less beaten path. My dad,
who is my greatest strength and biggest cheerleader, has patiently listened to every crazy
idea I have had, and encouraged it. He made the archival research for this dissertation
possible, accompanied me on trips to the Indian Parliament Library and India’s National
Archives, and adopted my obsession with tracking obscure constitutional committee
reports. My brother-in-law Badri, and my sister Smruti, who supports me in all my
choices, even though she believes them to be crazy.

My grand-uncle NR Srinivasan was often my window to the era of constitutional
drafting, and sent me comments and suggestions, for drafts, typed on a typewriter. My
parents-in-law, Rama and RS Rajagopalan have accommodated all family plans around
my academic calendar. My cousins Deepa, Vikram, Ranjini and Mohan have provided a
home away from home, in Maryland / Virginia.

I can always count on two closest friends, Vanicka and Ruchika, and my sister Smruti to
provide comic relief and tremendous support. The three of them are always with me like
a Patronus Charm. My friends Aadisht, Uday, Yashodhan, Angad, Supriya, Roy, and
Neha are scattered in different parts of the world, but are always only a phone call away.

A number of teachers paved the way for me to attend graduate school. Anil Kokrady,
taught me Microeconomics as an undergraduate at Delhi University and after his class,
suddenly the world made sense. Another important influence during my years as an
undergraduate student in New Delhi was Parth Shah. He introduced me to classical
liberal ideas, and Austrian economics, and lent me books by Hayek and Buchanan, which
were hard to come by in Delhi. During my years at the Faculty of Law at Delhi
University, I interned with Rajeev Dhavan, who introduced me to the wonderfully
complicated world of Indian constitutional law. I discovered many of the quirks and
puzzles, which I explore in this dissertation, during this time.

Next I come to my dissertation committee - who deserve my deepest gratitude.
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Peter Boettke is a source of inspiration. He combines his childlike and boundless
enthusiasm for economics with penetrating questions and profound insights about the
discipline. He has created an amazing program at GMU for young scholars interested in
Vienna-Virginia political economy and I feel lucky to be a part of it. I started developing
the ideas on the economic analysis of the Indian Constitution in his constitutional
political economy seminar, and with his encouragement, turned those ideas into this
dissertation.

I had my first class in graduate school with Richard Wagner, and I hope I never stop
learning from him. He is insightful, serious, and profound in his scholarship, and
simultaneously creative and imaginative in his thinking. I will always be in his debt for
his patience as a mentor and co-author. He is a remarkable human being and I have
benefitted from his kindness, thoughtfulness, and generosity too frequently to recollect
here.

My association with Larry White started in my second year of graduate school when he
sent me the chapter on Indian Planning from an early draft of his latest book. His research
emphasizing the role of ideas in economics got me thinking in a new direction for my
research. His careful eye rarely misses anything and I am grateful to him for making my
papers more readable. His wisdom and insight always comes with a side of humor.

In addition to my dissertation committee, I am grateful to Virgil Storr. He has always
helped me discipline my ideas, kept me focused, and given valuable comments on drafts
of various papers. Along with Virgil, Chris Coyne and Peter Leeson chipped away at my
weak arguments during the GSP workshops.

I have learnt tremendously from my co-authors while working on various published and
working projects. In particular, Francesco Parisi, Virgil Storr, Alex Tabarrok, Richard
Wagner, and Todd Zywicki have wrestled with my ideas and drafts and made them more
comprehensible.

I feel very lucky and privileged for studying with great teachers of economics at GMU. I
attended classes and seminars with Omar-Al-Ubaydli, Peter Boettke, Bryan Caplan, Dan
Klein, David Levy, John Nye, Mario Rizzo, Thomas Stratmann, Alex Tabarrok, Richard
Wagner, and Walter Williams. I was lucky to meet and interact with James Buchanan and
attend his lectures. These interactions, though few in number, were always insightful and
memorable.

In addition to my teachers, Simon Bilo has been the constant during my time in graduate
school. We started in the same study group, spent the last two years at NYU, and wrote
our dissertations with the same committee. I cannot imagine a better colleague, friend,
and human being to share this journey. With Simon, Will Luther, Nick Snow and Harry
David completed my study group and helped me get through the first year of graduate
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school. Along with them, many generations of participants at the GSP workshop
influenced my ideas and research as a graduate student.

At the Department of Economics at GMU and at the Mercatus Center, Mary Jackson,
Peter Lipsey, and Lane Conaway provided tremendous logistical support. I created many
headaches as an international student and they solved every administrative challenge that
I posed efficiently, and always with a kind word.

I must also acknowledge the financial and research support provided by a few other
institutions. The Mercatus Center at GMU funded my first three years of graduate study
and summer fellowships. They also funded a part of my dissertation research and my
trips to research archives in India. During the last two years at the Department of
Economics at New York University, I received dissertation research funding from the HB
Earhart Foundation and the Bradley Foundation. I have also received comments and
encouragement from the scholars participating in the Colloquium on Market Institutions
& Economic Processes. I must also mention the logistical support at NYU from Betty
Tsang, Hemayat Nabiel, and Anne Stubbing.

Last year I spent six weeks researching constitutional archives in the Parliament Library
and the National Archives in New Delhi and I am grateful for the cooperation and
logistical support at both these institutions.

I have spent the last two years at the Department of Economics at New York University
as a visiting student with Mario Rizzo. He is a profound thinker, wonderful teacher, and a
patient mentor. He worked closely with me through every draft of each chapter in this
dissertation and held my hand through the last two years of dissertation research and
writing. I have benefitted tremendously from his generosity, patience, kindness, wisdom,
and humor. I can never repay all that he has done; I hope to emulate him and do the same
for my students.

And finally, my deepest gratitude to Nandakumar Rajagopalan, my best friend, co-
conspirator, and the love of my life. You make everything possible. I’m the luckiest girl
in the world because each day I get to come home to you.

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TABLE OF CONTENTS

Page
List of Tables …………………………………………………………………………viii
List of Figures ………………………………………………………………………….ix
Abstract ................................................................................................................………x
Introduction...................................................................................................................…1
Chapter 1: Incompatible Institutions: Socialist Planning and Constitutionalism
in India........................................................................................................…7
1.1 The Ideas of India...............................................................................................11
1.2 Incompatible Institutions....................................................................................21
1.3 Indian Constitution v Central Planning...............................................................28
1.4 Concluding Remarks...........................................................................................55
Chapter 2:The Role of Ideology in Constitutional Craftsmanship: Evidence from
India...............................................................................................................57
2.1 Ideology and Institutional Design.......................................................................61
2.2 Visions, Interests, and Constitutional Rules.......................................................66
2.3 Evidence from India............................................................................................84
2.4 Concluding Remarks.........................................................................................105
Chapter 3: Constitutional Rules, Independent Judiciary and Rent Seeking:
Evidence from the Ninth Schedule.............................................................107
3.1 The Puzzle Posed by the Ninth Schedule.........................................................112
3.2 A Theory of Independent Judiciary and Rent Seeking.....................................122
3.3 Predictions and Evidence from India’s Ninth Schedule...................................135
3.4 Concluding Remarks.........................................................................................174
List of References …………………………………………………………………….176

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LIST OF TABLES

Table Page
1. Constitutional Amendments and Additions to the Ninth Schedule.................……117
2. Inefficient Legislation in the Ninth Schedule..........................................................118
3. Constellations of Constitutional Rules ....................................................................135
4. Federal and State Legislation in the Ninth Schedule...............................................146
5. Ninth Schedule Legislation and Type of Legislature..............................................147
6. Legislation and Amending Acts in the Ninth Schedule...........................................148
7. Ninth Schedule Legislation and Basic Structure Test..............................................169

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LIST OF FIGURES

Figure Page
1. Process of constitution formation and amendment.............................................……4
2. Present value of expected external costs of the amendment rule..............................71
3. Present value of expected decision costs of the amendment rule.............................73
4. Amendment rule in the Constrained Vision..............................................................74
5. Present value of expected costs of expropriation......................................................78
6. Present value of expected costs of private predation................................................79
7. Present value of total expected external costs of the amendment rule.....................81
8. Present value of expected decision costs of the amendment rule.............................82
9. Amendment rule in the Unconstrained Vision..........................................................83
10. Ninth Schedule: 1951-Present.................................................................................172
11. Amending Acts as a Percentage of Ninth Schedule Legislation.............................173

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ABSTRACT

ECONOMIC ANALYSIS OF AMENDMENTS TO THE INDIAN CONSTITUTION

Shruti Rajagopalan, Ph.D.

George Mason University, 2013

Dissertation Director: Dr. Peter J Boettke

The Indian Parliament has amended the Indian Constitution ninety-seven times
since its ratification in 1950. Fundamental Rights in India were amended frequently,
specifically the right to private property, which was deleted in 1978 through the Forty-
Fourth Amendment. These amendments gradually removed the constitutional constraints
placed by the founding fathers on democratic decision-making.
In this dissertation, I analyze the role of the ideology and interests of political
entrepreneurs in forming and amending constitutional rules in postcolonial India. I also
examine the robustness of the amendment process and its vulnerability to political and
ideological capture by interest groups in the post-constitutional setting in India.
In the first essay, I argue that frequent constitutional amendments are a
consequence of the incompatibility between socialism and constitutionalism in India. I
provide evidence from constitutional amendments and Supreme Court cases to show that