Geolegal Weekly #15 - Indian Elections / TikTok Ban / US to Sanction Israel's Military

India's mega-elections give rise to questions of political violence, Supreme Court independence, legal reforms and risks of offshoring legal work in an increasingly autocratic geography.

India will spend nearly $15bn to send almost 1 billion voters to the polls over a six week election ending 4 June. Will Prime Minister Nerendra Modi’s BJP-led alliance win big or win really big?

The election has implications for a major global economy and the justice system in India. It is also critical to understand for law firms and other professional services firms which rely on India-based talent on a daily basis. Below I break down some of the key dynamics and implications of the election.

To get started, I spoke with Bilal Baloch, who is author of the book When Ideas Matter: Democracy and Corruption in India. He is also Partner at Shorooq Partners and Co-Founder of Enquire.ai. In a longer-form interview, Bilal traces some of the key issues at play in the election, noting the centrality of welfare politics on the campaign trail.

Watch my interview with Bilal Baloch here

Modi = Odds-on Favorite + Business Favorite

Forecasting close elections is really hard (some day I’ll let you know who I think is going to win the US election in November…but not today). This election is easier. That’s because no pollsters or analysts think Modi’s BJP-led alliance will lose.

The BJP’s National Democratic Alliance is trying to beat its 2019 performance with a goal of clinching 400 out of 543 seats in parliament. This would consolidate power and give the government a chance to proceed with sweeping reforms, perhaps even to the legal system.

Since Modi came to power in 2014, economic reforms have unlocked serious growth. A clean-up of the banking sector, a war on corruption and a goods and services tax have lead to significant growth - at 6.5%, it’s double the global average since 2021-and reduced the deficit. Ambitious welfare programs have been implemented. Back-office oriented offshore platforms are giving way to strategic “global capability centers,” through which global companies can capitalize on India’s immense technical talent for research and development, and innovation. Rapid transit systems now criss-cross over a dozen cities and there are efforts to build a home grown outer space program. India has begun asserting itself on the global stage.

As a result, business leaders generally support the BJP and the party has raised significant money through what were supposed to be anonymous electoral bonds as well as corporate trusts. Generally speaking, global investors have cheered Modi’s leadership. While issues like unemployment are pervasive, and while a number of the execution of some of the economic reforms have been criticized, investment banks like Goldman Sachs expect it to remain a good investment after the election, even if valuations are at an all time high.

Social Tension, Judicial Independence and Other Risks

While India’s economic story is strong, there are risks beneath the surface. My goal in outlining the below is not to pass normative judgment but rather to draw some attention to what’s in play and what’s at stake so businesses can evaluate their strategies in coming weeks and beyond.

First, there is a significant risk of social tension boiling over into full-blown violence during and after the election. Modi has been fanning the flames of Hindu-Muslim tension for political gain. Modi was accused of condoning anti-Muslim violence when he was Chief Minister of Gujarat in 2002, though he was later cleared. Earlier this week, he used language the opposition party has called hate speech to talk about India’s nearly 200 million Muslims. He stoked Hindu-Muslim tensions by consecrating a temple to Hindu Lord Ram on a disputed site earlier this year. And he implemented a controversial citizenship law to fast track persecuted minorities from nearby countries - except for Muslims. Modi’s government revoked special status for the Muslim-majority Jammu and Kashmir region. His manifesto, detailed below, promises to implement a Uniform Civil Code (UCC) that would undo the ability of religious sects to implement their own personal and family laws.

When populations feel persecuted, they can take to the streets - and when a government rules unapologetically, violence can be the result.

This also raises questions about judicial independence as a number of the above policy items were enabled by India’s Supreme Court. The Economist wrote an interesting article recently supporting the argument Modi’s government is trying to pressure the courts - and that the courts have refused to get in the way of him on the most political issues, though they will stand up from time to time. Foreign Policy has a good breakdown too of how some politically sympathetic judges have been rewarded politically. For now, there’s a sense of an independent judiciary under growing pressure. But more years of a more emboldened administration risks further reduction in independence.

The broader sense that India is slipping into elective authoritarianism is hard to ignore. A number of opposition candidates have found themselves arrested at politically sensitive moments. Political violence, spying and pressure on critical journalists is reportedly rising. This may be the world’s biggest democracy going to the polls, but, as with many democracies around the world in 2024, there’s a sense that the election strays from purist democratic ideals.

Legal System Reform

Despite judicial independence concerns, there is a potentially big prize in legal system reform, which is a manifesto promise that Modi could follow-through on after the election.

India is well known for having one of the most backlogged legal systems in the world. As the New York Times points out, it would take over 300 years to clear the backlog of 50 million-plus cases. The Carnegie Endowment has a nice breakdown of why this is the case - from judicial vacancies, to underfunding, to simple (lack of) judicial productivity. But a big piece of this is the fact that the government initiates a lot of litigation. Reducing this would be a key step in enhancing citizen rights and also making it easier to do business in India.

The BJP’s manifesto promises to streamline the court system through a number of steps. First, it will formulate a national litigation policy “to expedite the resolution of all matters in courts, lower the cost of contested court proceedings, and decrease the number of cases in which the government is a party and the consequent load on the courts.” This isn’t a new idea, but it is one that could potentially get done this time. Second, it is promising to “completely overhaul the commercial and civil justice systems, on the lines of criminal justice reforms” that were passed late last year. As the manifesto reads, “This revamp will aim to streamline procedures, enhance the efficiency of legal processes and ensure timely justice, fostering a more business-friendly and citizen-centric legal environment". There’s talks about further investment in electronic courts. Finally, it will implement the UCC mentioned above, that may procedurally streamline at the expense of religious autonomy.

Changes like this take time to yield dividends and are subject to well-ingrained cultural norms, like the role that recourse to litigation serves in an economy. But taken together these would be big changes that would streamline doing business in India, and potentially unlock further investment.

From the legal world’s back-office to innovation hub?

India is of particular importance to law firms, alternative legal service providers and other professional services firms who have built sprawling networks of offshore knowledge workers to serve global clients. While wages and time zones have led some providers to shift some work to Latin America or the Philippines, India still has strong infrastructure for leveraging highly educated talent in a scalable way. From legal process outsourcing to the development and maintenance of legal software, there’s probably no geography more important to the functioning of US and European legal departments and law firms than India.

I suspect this will increase over time. Yes, there are arguments to be made that the type of knowledge work which has been offshored is the first type of work that will get automated by AI. And that there is an emphasis on near-shoring that has put a ceiling on the amount of work going abroad. But the reality is, as Bilal points out above, that humans will be needed to train and monitor AI, while also editing and translating its outputs for other humans - and businesses are going to need to do this as cost effectively as possible. In line with the move toward more R&D driven global capability centers, I think we’ll see further investment from the global legal industry in its India footprint in this next cycle of legal innovation.

As a result, I would expect the type of work to change but not necessarily a reduction in geographical emphasis in the short run. The election - which effectively means business as usual, with a chance of sporadic violence as well as a chance of business-improving reforms - should support that preference.

In the short-term, however, watch for the potential spread of unrest with regards to safeguarding your team: sectarian violence spread close to business hubs outside Delhi a few months back. And also watch for foreign policy tensions (as well as potentially shifting business preferences) from Muslim-majority countries, who may take increasing issue with the sectarian politics described above, as has happened in the past.

One longer-term risk to watch out for is that huge amounts of client sensitive data being processed in a country that is increasingly authoritarian wouldn’t normally feel like a good recipe:

• For law firms, do you have clients who have been critical of the Indian government in a way that would encourage the government to snoop around to find leverage? If so, you could be at risk and should spend time considering mitigation.

• For corporate legal departments, are you comfortable with the offshoring footprint of your providers in such a dynamic?

While it’s not necessarily high risk, it’s a risk you should at least consider.

In Other News

TikTok Ban - I wrote a few weeks ago about a potential ban of the TikTok app and yesterday the US Congress has passed a law which would require it in the next year. President Biden has said he would sign it - and the time window means it comes after the election - so I suspect this is now going to become law. But it’s not the final word as it will be challenged on freedom of speech grounds at a minimum. In terms of implications, there will be bluster from Beijing as well as retaliatory measures that will make it harder for US businesses in China. But the bigger risk to me is that the US has fired a shot about protecting national data from dangerous social media platforms - which is something that could blowback against its own tech giants operating in places like Europe and elsewhere who could cite the precedent as justification for clamping down.

US Moves to Sanction Israeli Military - Probably not the headline you expected to see, but an interesting turn of events as the US has indicated it is planning to sanction an Israeli military unit linked to alleged Palestinian abuse in 2022. No doubt there is political motivation for the Biden administration to look like it’s holding Israel to account on human rights issues without taking a specific stand on the ongoing Gaza operation. The US government is citing the Leahy Law, which blocks aid for foreign military groups accused of abuses.

That’s all for this week.

-SW