India 39;s Economic Growth In Historical Perspective

[Brittany Bhadd]

Inrecent decades, new endogenous growth theory has become popular but the ideas are not new. They go back at least as far as Adam Smith, and the subsequent contributions made notably by Alfred Marshall and Allyn Young. This book critically discusses and provides an historical perspective to the entire spectrum of endogenous growth theories starting with Adam Smith and ending with Paul Romer. It fills an important gap in the literature. While contributions of individual authors are readily available, there is no comprehensive study on the subject covering such a vast ground, critically discussing these authors in a comprehensive framework. It collates all the arguments and economic viewpoints in one collection, providing both the seasoned economist and a graduate economist with a critical comparison of origin, mechanisms, conclusions, and policy implications of these models.

Ramesh Chandra received his PhD in Economics from the University of Strathclyde, UK, and studied economics at the Delhi School of Economics, University of California (Berkeley) and University of Glasgow. He has held professorships at Lal Bahadur Shastri National Academy of Administration and Indian Council of Research on International Economic Relations, India, among others. His research interests include trade policy and growth, the relationship between economic thought and development economics, and the history of economic thought. He has published extensively including a book Allyn Abbott Young.

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The World Economy brings together two reference works by Angus Maddison: The World Economy: A Millennial Perspective, first published in 2001 and The World Economy: Historical Statistics, published in 2003. This new edition contains Statlinks, a service providing access to the underlying data in Excel format. These two volumes bring together estimates of world GDP for the past 2000 years and provide a unique perspective on the rise and fall of economies historically.

"One controversial clash of theories fueled by Maddison's data concerns the relative status of (growth in) the West versus the rest. The figures (in this book) are enriching economists' understanding of what make economies grow, and may even make it possible to reject some of the most prominent historical explanations." Diane Coyle, author of The Soulful Science, former economics editor of The Independent newspaper.

Around 500 BC, the Mahajanapadas minted punch-marked silver coins.[citation needed] The period was marked by intensive trade activity and urban development.[citation needed] By 300 BC, the Maurya Empire had united most of the Indian subcontinent including Tamilakam, which was ruled by Three Crowned Kings.[citation needed] The resulting political unity and military security allowed for a common economic system and enhanced trade and commerce, with increased agricultural productivity.[citation needed]

The Maurya Empire was followed by classical and early medieval kingdoms, including the Cholas, Pandyas, Cheras, Guptas, Western Gangas, Harsha, Palas, Rashtrakutas and Hoysalas. The Indian subcontinent, due to its large population, had one of the largest economy of any region in the world for most of the interval between the 1st and 18th centuries.[1][2][3][failed verification][4][better source needed] Angus Maddison estimates that from 1-1000 AD India constituted roughly 30% of the world's Population and GDP.[2]

India experienced per-capita GDP growth in the high medieval era, coinciding with the Delhi Sultanate.[citation needed] By the late 17th century, most of the Indian subcontinent had been reunited under the Mughal Empire, which for a time Maddison estimates became the largest economy and manufacturing power in the world, producing about a quarter of global GDP, before fragmenting and being conquered over the next century.[5] Bengal Subah, the empire's wealthiest province, had an advanced, productive agriculture, textile manufacturing and shipbuilding, in a period of proto-industrialization.[6][7]

India experienced deindustrialisation and cessation of various craft industries under British rule,[10] which along with fast economic and population growth in the Western world, resulted in India's share of the world economy declining from 24.4% in 1700 to 4.2% in 1950,[11] and its share of global industrial output declining from 25% in 1750 to 2% in 1900.[10] Due to its ancient history as a trading zone and later its colonial status, colonial India remained economically integrated with the world, with high levels of trade, investment and migration.[12]

The Indus Valley civilisation, the first known permanent and predominantly urban settlement, flourished between 3500 BCE and 1800 BCE. It featured an advanced and thriving economic system. Its citizens practised agriculture, domesticated animals, made sharp tools and weapons from copper, bronze and tin, and traded with other cities.[15] Evidence of well-laid streets, drainage systems and water supply in the valley's major cities, Dholavira, Harappa, Lothal, Mohenjo-daro and Rakhigarhi, reveals their knowledge of urban planning.

Although ancient India had a significant urban population, much of India's population resided in villages, whose economies were largely isolated and self-sustaining.[citation needed] Agriculture was the predominant occupation and satisfied a village's food requirements while providing raw materials for hand-based industries such as textile, food processing and crafts. Besides farmers, people worked as barbers, carpenters, doctors (Ayurvedic practitioners), goldsmiths and weavers.[16]

Religion played an influential role in shaping economic activities. Pilgrimage towns like Prayagraj, Varanasi, Nasik and Puri, mostly centred around rivers, developed into centres of trade and commerce. Religious functions, festivals and the practice of taking a pilgrimage resulted in an early version of the hospitality industry.[17]

Economics in Jainism is influenced by Mahavira and his philosophy. He was the last of the 24 Tirthankars, who spread Jainism. Relating to economics, he emphasised the importance of the concept of 'anekanta' (non-absolutism).[18]

In the joint family system, members of a family pooled their resources to maintain the family and invest in business ventures. The system ensured younger members were trained and employed and that older and disabled members would be supported. The system prevented agricultural land from splitting with each generation, aiding yield from the benefits of scale. Such sanctions curbed rivalry in junior members and instilled a sense of obedience.[19]

Along with the family- and individually-owned businesses, ancient India possessed other forms of engaging in collective activity, including the gana, pani, puga, vrata, sangha, nigama and Shreni. Nigama, pani and Shreni refer most often to economic organisations of merchants, craftspeople and artisans, and perhaps even para-military entities. In particular, the Shreni shared many similarities with modern corporations, which were used in India from around the 8th century BC until around the 10th century AD. The use of such entities in ancient India was widespread, including in virtually every kind of business, political and municipal activity.[21]

The Shreni was a separate legal entity that had the ability to hold property separately from its owners, construct its own rules for governing the behaviour of its members and for it to contract, sue and be sued in its own name. Ancient sources such as Laws of Manu VIII and Chanakya's Arthashastra provided rules for lawsuits between two or more Shreni and some sources make reference to a government official (Bhandagarika) who worked as an arbitrator for disputes amongst Shreni from at least the 6th century BC onwards.[22] Between 18 and 150 Shreni at various times in ancient India covered both trading and craft activities. This level of specialisation is indicative of a developed economy in which the Shreni played a critical role. Some Shreni had over 1,000 members.

The Shreni had a considerable degree of centralised management. The headman of the Shreni represented the interests of the Shreni in the king's court and in many business matters. The headman could bind the Shreni in contracts, set work conditions, often received higher compensation and was the administrative authority. The headman was often selected via an election by the members of the Shreni, and could also be removed from power by the general assembly. The headman often ran the enterprise with two to five executive officers, also elected by the assembly.[citation needed]

Punch marked silver ingots were in circulation in the 6th-5th century BC.[23] They were the first metallic coins minted around the 6th century BC by the Mahajanapadas of the Gangetic plains and were India's earliest traces of coinage.

The number of coins in circulation declined and instead credit arrangements predominated.[citation needed] Contemporary Hindu law devote increasing attention to sureties, collateral, promissory notes and compound interest.[25]

Maritime trade was carried out extensively between South India and Southeast and West Asia from early times until around the 14th century AD.[citation needed] Both the Malabar and Coromandel Coasts were the sites of important trading centres from as early as the 1st century BC, used for import and export as well as transit points between the Mediterranean region and southeast Asia.[27] Over time, traders organised themselves into associations which received state patronage. Historians Tapan Raychaudhuri and Irfan Habib claim this state patronage for overseas trade came to an end by the 13th century AD, when it was largely taken over by the local Parsi, Jewish, Syrian Christian and Muslim communities, initially on the Malabar and subsequently on the Coromandel coast.[28]

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