In Southern India, Hindus can marry first cousins - in other words you and your wife may have the same grandparents. Also girls can marry their uncle - mother's brother. Obviously the law sanctions this - but how about Hindu scripture?
Yes they definitely talk about the girls who are fit to marry and about those who are not fit.
See the following verses:
A householder should marry a wife who comes from the same class as he, who has not been married before, and who is younger than he. A marriage can be contracted only between persons not belonging to a family with the same ancestral seer and not related within six degrees on the side of the legal or the biological father , or within four degrees on the mother’s side.
Gautama Smriti 3.24
Householder––after bringing his anger and excitement final bath with the permission of his teacher, he should select for his wife a woman who does not belong to a lineage with the same ancestral seer who has not experienced sex before, who is younger than he and belongs to the same class as he, and who is not related within four degrees on the mother’s side or six degrees on the father’s side. He should kindle the nuptial fire.
Vashishta Dharma Sutras 7.3
As regards, the practice followed in South India, Baudhayana says the following:
There are five areas in which the practices of the south and the north differ from each other . We will explain the ones peculiar to the south.
They are: eating in the company of an uninitiated person, eating in the company of one’s wife, eating stale food, and marrying the daughter of the mother’s brother or the father’s sister.
The ones peculiar to the north are: selling wool, drinking rum, trafficking in animals with teeth in both jaws, making a living as a soldier, and travelling by sea. If a man follows the practices of the former in the latter, and those of the latter in the former, he becomes defiled. Each practice is based solely on the authority of the customs of that region.
That is untrue, say Gautama. A man should pay heed to neither set of practices, because they are shown to be opposed to the tradition of cultured people.
Baudhayana Dharma Sutras 1.2.3