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Law and the Economy in a Young Democracy: India 1947 and Beyond

Online ISBN:
9780226799148
Print ISBN:
9780226799001
Publisher:
University of Chicago Press
Book

Law and the Economy in a Young Democracy: India 1947 and Beyond

Tirthankar Roy,
Tirthankar Roy
London School of Economics
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Anand V. Swamy
Anand V. Swamy
Williams College
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Published online:
19 May 2022
Published in print:
24 January 2022
Online ISBN:
9780226799148
Print ISBN:
9780226799001
Publisher:
University of Chicago Press

Abstract

Economists have long lamented that the inefficient Indian legal system undermines economic activity. How has this come to be? The prevailing common sense is that it is understaffed and under-resourced, given the size of India’s population. This makes adjudication slow and costly. Taking this as given, Law and the Economy in a Young Democracy focuses on the content of the law and its relationship with economic development. It argues that legal evolution in independent India has primarily been shaped by three factors: the desire to reduce inequality and poverty; the suspicion that market activity, both domestic and international, can be detrimental to these goals; and the strengthening of Indian democracy over time, giving voice to a growing fraction of society, including the poor. For the first four decades after independence, the equity-oriented and market-skeptical development strategy adopted by independent India informed a range of interventions by the State. It tried to transfer land as well as to prevent its transfer. A range of private credit transactions were declared illegal. Employer-worker relationships in the manufacturing sector were highly regulated. Environmental law did not incentivize; it prohibited. As policy has become more market-friendly in the recent decades, India has been trying to align itself with global law. More legal and regulatory changes are needed but are opposed by potential losers who, often with good reason, are skeptical of the government’s promises of compensation. Their concerns cannot be ignored by governments that seek reelection. The State’s lack of credibility has slowed legal reform.

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