• Is the “political” claim true, then?

There is some support in India’s constitutional history for the idea that a politically independent judiciary can assist financial development. The Supreme Court [before the Emergency] came up with many ingenious ways to protect private property from public takings. Although ultimately the legislature succeeded in putting the protection of property rights beyond justiciability, it seems clear that the independent and activist judiciary delayed this process for some time¿Thus it seems likely that the political independence of India’s judiciary has played a meaningful role in protecting property rights in the years since independence. Despite the problems of backlog, the Supreme Court has been willing to go to great lengths to ensure that cases involving issues of expropriation are heard. Yet whilst a powerful independent judiciary can clearly act as a constraint on rent-seeking legislative measures, this works as a double-edged sword—following liberalisation in 1991, strong judicial protection has acted as a brake on the rapid transformation of credit markets, owing to constitutional challenges to reforms to debt enforcement and insolvency laws.

• So what does it mean for theories about the role of law in financial development?

We have seen that two aspects of the ‘legal origins’ claim at best only partly explain the pattern which the development of India’s investor protection has followed since liberalisation. And to the extent that it does — through the ‘political’ channel — the implications are at least partly contrary to the manner predicted by the theorists: India illustrates that a politically independent judiciary may be a check on beneficial adaptation, as well as rent-seeking.

... contd.