Over the past half century there has been an accelerating trend towards liberalization in the legal services industry. International free trade agreements have sought to promote open markets for legal services. The United States, United Kingdom, many European countries, Australia, Japan, Russia, China, and Singapore have all opened their legal markets to foreign law firms. India is something of an anomaly in this regard. Although it has one of the world’s largest economies and has benefited greatly from liberalization in many industries, its legal industry remains closed. Competition for foreign capital with other developing nations, particularly China, makes this an issue of paramount importance for India’s development.

This article examines India’s ban on the entry of foreign law firms into its legal market and assess the implications of this policy on Indian firms’ ability to attract foreign direct investment. It then examines strategies that foreign firms currently use to participate in the Indian market and their costs and benefits for the development of India’s legal and governance infrastructure. Finally, it examines proposals for liberalizing the market in the light of their potential effects on India’s ability to attract foreign direct investment.