Indian finance went through a first phase of central planning (1947-1992) and a second phase (1992-2016) with conflicting themes of liberalisation and enhanced state control. In the first phase, the financial system was a handmaiden for state control of the economy, directing resources in harmony with the wishes of the government. State control was achieved through government ownership.

In many areas, private financial firms are now important. The full ecosystem of modern finance, with information processing and risk-taking by private persons, blossomed in the equity market. For two decades there was a remarkable policy process that yielded gains in fields such as the equity market, pension reforms, bankruptcy code, etc. But alongside this there was the expansion of ‘the administrative state’ in the form of financial regulators. Regulators engage in micromanagement of products and processes. While there is isomorphic mimicry with many things that look like a financial system, officials retain substantial control over how finance works. In a functional perspective, Indian finance today resembles the environment of the 1980s more than meets the eye.

The journey of Indian finance is a chapter in Cambridge Economic History of Modern South Asia, edited by Latika Chaudhary, Tirthankar Roy, and Anand V. Swamy, forthcoming, Cambridge University Press.