Law, Finance, and Politics: The Case of India

John Armour and Priya Lele

Working Papers from Centre for Business Research, University of Cambridge

Abstract: The process of liberalisation of India's economy since 1991 has brought with it considerable development both of its financial markets and the legal institutions which support these. An influential body of recent economic work asserts that a country's 'legal origin'-as a civilian or common law jurisdiction-plays an important part in determining the development of its investor protection regulations, and consequently its financial development. An alternative theory claims that the determinants of investor protection are political, rather than legal. We use the case of India to test these theories. We find little support for the idea that India's legal heritage as a common law country has been influential in speeding the path of regulatory reforms and financial development. There is a complementarity between (i) India's relative success in services and software, (ii) the relative strength of its financial markets for outside equity, as opposed to outside debt, and (iii) the relative success of stock market regulation, as opposed to reforms of creditor rights. We conclude that political explanations have more traction in explaining the case of India than do theories based on 'legal origins'.

Keywords: India; Law and Finance; Investor Protection; Economic structure and financial structure (search for similar items in EconPapers)
JEL-codes: G28 G38 K22 K40 O16 P37 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-law and nep-pol
Note: PRO-2
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.jbs.cam.ac.uk/wp-content/uploads/2023/05/cbrwp361.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbr:cbrwps:wp361

Access Statistics for this paper

More papers in Working Papers from Centre for Business Research, University of Cambridge
Bibliographic data for series maintained by Ruth Newman ().