Economic History of India
The economic history of India can be understood by the background of its pre-colonial era, colonial era and post colonial era.
Pre-colonial Era of India
The country saw the first urban
settlement during the times of Indus valley civilization. The era
marked the practice of settled lifestyle from nomadic types and adopted
agriculture, domesticated animals, used uniform weights and measures,
made tools and weapons, and traded with other cities. Agriculture also
opened the further options of hand-based industries, such as textiles,
food processing and crafts resulting into self- sustaining economy in
Barter system was mainly observed for trading
purposes. Villages used to pay a portion of their agricultural produce
as revenue to the rulers, while its craftsmen received a part of the
crops at harvest time for their services. Hands made goods were also
exported to Europe, the Middle East and South East Asia in return for
gold and silver.
India flourished in the sector of agriculture
by the end of Medieval Age, the medieval age marked the decline of
Mughals and rise of Maratha Empire. During this time Indian economy was
on its zenith but later the economy started declining with the
appearance of British in the country. The phase of decline continued
till the year 1857.
Colonial Era of India
at its peak and referred golden bird before the arrival of different
invaders to the country but several invasions turned the golden bird
into mere crippling bird riddled with poverty and illiteracy.
India Company also invaded the country and further worsened the
economic conditions of the country by imposing different taxes like
revenue taxes, property taxes and so on on the general public. These harsh
economic policies caused mass impoverishment and destitution of
majority of people and also resulted into massive drain of India’s
resources by ruining India's large handicrafts industry.
protested the system by employing swadeshi movement, as plan to
diminish British economic superiority by boycotting British products in
the Indian market and reviving the market for domestic-made products
and production techniques.
An estimate by Cambridge University
historian Angus Maddison reveals that India's share of the world income
fell from 22.6% in 1700, comparable to Europe's share of 23.3%, to a
low of 3.8% in 1952. Few of the positive aspects of the British colony
rule are the introduction of free trade, single currency with fixed
exchange rates, standardized weights and measures, capital markets.
company also established a well developed system of railways and
telegraphs, a civil service that aimed to be free from political
interference, a common-law and an adversarial legal system. The time of
British rule in India coincided with the major changes of
industrialization, and significant growth in production and trades in
the world economy.
The colonial rule left the India in miserable
condition with the poorest economy in the world with poverty all around
and low rates of literacy.
Post Colonial Era of India
got independence after the long colonial rule in 1947 by the hard
struggle of freedom fighters of the nation. During the period of
independence, Indian economy was totally based on agriculture but the
portrait of Indian economy changed after independence. Indian economy
faced many fluctuations after the independence of the country but still
moves on at a steady pace.
India faced another trauma of
partition just after the independence which crushed the country by
physical and economic disruption and further worsened the state of
Indian economy. Economic policies formulated under the leadership of Pt Jawahar Lal Nehru, after independence was influenced by the
Polices emphasized on import substitution,
industrialization, state intervention in labor and financial markets, a
large public sector, business regulation, and central planning. Five
year plans were also introduced for improving the economy. Green
revolution in 1965, improved agriculture and made the country
self-sufficient in food grains.
In late 80’s, then Prime
Minister Mr. Rajiv Gandhi further improved the state of Indian economy
by relaxing certain rules like reduced corporate taxes removed price
controls all resulted into the increased rate of growth and high fiscal
deficits and a worsening current account. In 1990, Prime Minister
Narasimha Rao along with his finance minister Manmohan Singh initiated
the economic liberalization of 1991 and ended many public monopolies,
allowing automatic approval of foreign direct investment in many
Since then, the overall direction of liberalization has
remained the same and India has encounted as one of the
fastest-growing economies in the developing world; during this period,
the economy has grown constantly, but with a few major setbacks. This
has been accompanied by increases in life expectancy, literacy rates
and food security.
The economy had stagnated since the late
nineteenth century, and industrial development had been controlled to
preserve the area as a market for British manufacturers.
the economy of India is the fifth largest in the world as measured by
purchasing power parity (PPP) and when measured in USD exchange-rate
terms, it is the tenth largest in the world, with a GDP of US $1.0
In 2003, Goldman Sachs predicted that India's
GDP in current prices will overtake France and Italy by 2020, Germany,
UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to
be the third largest economy of the world, behind US and China.