ICS Occasional Papers

While India has a long history of functional capital markets, both China and India started market reforms process almost around the same time. But the size of the Chinese market is much bigger today than India’s. However, the market micro-structure and the regulatory system in India are more evolved and robust. Transparent laws and regulations and the practice of meaningful consultations at all stages have given the analysts, commentators and investors-both foreign and domestic, a high degree of confidence in the system. The predictability about regulatory action in case of any infringement, its objectivity and a laid down system of judicial review also gives trust regarding checks and balances and the rule of law in India. In comparison, China has exhibited arbitrary and unpredictable tendencies in case of any volatility, more so in the last two years. International experience shows that deeper structural reforms rather than a unilateral and inconsistent reaction to a problem are ways for sustainable development. But, it is also true that most foreign investors find the Chinese market too attractive and too large to ignore.