Economic Freedom Under Indian Constitution: Beyond Lockean Libertarianism

Economic freedom is often assumed to be an inherent component of capitalism, based on the libertarian belief that individuals possess natural rights against state interference. John Locke expressed his theory of libertarianism, which was in many ways very distinct from Bentham's idea of utilitarianism (maximising happiness). The idea of libertarianism emphasised individual rights. Locke argued that supreme nature has provided individuals with natural rights, which render them free from excessive state restrictions. The state has no sovereignty to restrict rights that are provided by nature itself, rights such as the right to life, the right to free speech, the right to education, etc. which we today recognise as fundamental rights in the modern nation-state. However, the Indian Constitution exercises a markedly different approach. While it provides economic freedom, it does so within a framework that deliberately subjects such freedom to social objectives, constitutional limitations, and judicial oversight. This divergence raises the question of whether economic freedom in India can truly be understood through a Lockean libertarian lens? Such an understanding appears difficult to sustain. Instead, India follows a distinct model of constitutionally regulated capitalism, one that exercises private enterprise and market activity while rejecting libertarian economic absolutism in favour of welfare, social justice, and state responsibility.

Locke's libertarianism was not entirely coexistent with the law of God, but it was somewhere aligned with Adam Smith's idea of capitalism, where an individual possesses the sovereignty to implement his ideas with minimal state intervention. One enjoys full sovereignty to exercise all rights granted by nature.

There are three specific economic problems, namely: “what to produce,” “how to produce,” and “for whom to produce.” Whoever solves these questions essentially holds control over the economy. The idea of capitalism emphasises private players as problem solvers in accordance with societal demand. In contrast, under a communal or command economy, the government itself decides these aspects and directs private players accordingly, actively controlling both the economy and society while emphasising what society needs rather than what society wants.

The ideas of capitalism and liberalism are co-relative to each other. Both embrace private property, minimal government intervention, and the emphasis on individual freedom. Liberty provides the philosophical justification for capitalism and acts as its

backbone, arguing that individuals are best placed to make economic choices without coercive state control.

Capitalism, in its liberal form, is founded on free markets, voluntary exchange of goods, and competition. In such an economy, the state is assigned limited duties, primarily focused on protecting life and basic order.

India's lawmakers are often described as being influenced by socialist ideology. However, due to diverse thoughts and intense debates within the Constituent Assembly, their ideas found place within the Indian Constitution, where we also see clear traces of liberal capitalism. This is evident in Article 19(1)(g), which guarantees individuals the freedom to practise any profession or trade. This provision was strongly supported by the Chairman of the Drafting Committee, Dr B. R. Ambedkar, who advocated that in India every citizen must have the right to practise any profession based on skill rather than caste or circumstance. He did not believe in the concept of natural rights, he supported enforceable constitutional rights, a view that ultimately found expression in Article 19(1)(g). Many intellectuals supported this view, and it was ultimately enshrined as a fundamental right under Article 19(1)(g).

However, the presence of “reasonable restrictions” under Article 19(6) significantly limits the freedom guaranteed under Article 19(1)(g). This indicates that Indian capitalism is not purely libertarian and does not align fully with what John Locke envisioned. The Supreme Court has repeatedly upheld regulatory control in the name of public interest, welfare of the state, and the maintenance of dignity, as seen in Modern Dental College v. State of Madhya Pradesh.

Further, the Directive Principles of State Policy, which define what an ideal state should pursue, impose positive obligations on the state to bring about social change and development. These obligations include welfare-oriented redistribution of resources and the pursuit of social justice. This directly conflicts with libertarian ideals that oppose redistributive intervention. As a result, India follows a welfare-oriented capitalist model initially referred to as a mixed economy rather than a libertarian one.

Between Robert Nozick's metaphor of the “night-watchman state,” where the state is confined to limited roles of safety and regulation and remains largely invisible, and the Indian constitutional reality, there exists a clear divergence. Judicial interpretation in India tells a whole different story. Indian courts have generally viewed economic freedoms through the lens of social justice rather than absolute individual autonomy.

In Chintaman Rao v. State of Madhya Pradesh (1951), the Supreme Court clarified that the freedom to carry on trade under Article 19(1)(g) is not absolute and can be restricted for purposes of social control. In Excel Wear v. Union of India (1979),

while keeping the importance of business freedom in mind, the Court upheld labour-protective legislation, reaffirming the priority of social justice over pure market autonomy. More recently, in Internet and Mobile Association of India v. Reserve Bank of India (2020), the Court struck down excessive regulatory restrictions on cryptocurrency trading, signalling judicial concern for proportionality, but without embracing libertarian non-intervention. Similarly, in Vodafone International Holdings v. Union of India (2012) and the subsequent legislative override, the tension between market freedom and state fiscal sovereignty became evident.

Collectively, these cases demonstrate that Indian courts balance economic liberty with constitutional morality, public interest, and distributive justice, confirming that India's capitalist framework remains constitutionally regulated rather than libertarian in the Lockean sense. Economically, even after the LPG reforms of 1991, the state continues to exercise extensive regulatory power, demonstrating that liberalisation does not equate to Locke's libertarianism. In the United States, liberalisation refers to democratic governance operating under natural rights. In China, however, the situation differs significantly, where individual liberty does not even exist on paper. India, therefore, walks a middle path.

In conclusion, while libertarianism philosophically supports capitalism, the Indian legal system adopts capitalism without embracing libertarian individual economic absolutism. Economic freedom under the Constitution is deliberately conditioned by social objectives, welfare concerns, and state regulation; therefore, it is not a model of laissez-faire libertarianism but a constitutionally governed capitalism. The Constitution embraces capitalism by placing clear limits upon it. In India, despite hundreds of reforms and amendments, the state continues to function as a watchman that operates not in the shadows of the night but in the daylight actively observing, regulating, and intervening in pursuit of growth aligned with welfare, with open and vigilant eyes.

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References:

John Locke – Stanford Encyclopedia of Philosophy https://plato.stanford.edu/entries/locke/

Robert Nozick – Encyclopaedia Britannica https://www.britannica.com/biography/Robert-Nozick

Article 19(1)(g) & Article 19(6), Constitution of India

Modern Dental College & Research Centre v. State of Madhya Pradesh (2016)

Chintaman Rao v. State of Madhya Pradesh (1951)

Excel Wear v. Union of India (1979)

Internet and Mobile Association of India v. Reserve Bank of India (2020)

Vodafone International Holdings v. Union of India (2012)