Indian Economy History

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Around500 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]

Other scholars suggest trading from India to West Asia and Eastern Europe was active between the 14th and 18th centuries.[29][30][31] During this period, Indian traders settled in Surakhani, a suburb of greater Baku, Azerbaijan. These traders built a Hindu temple, which suggests commerce was active and prosperous for Indians by the 17th century.[32][33][34][35]

Further north, the Saurashtra and Bengal coasts played an important role in maritime trade, and the Gangetic plains and the Indus valley housed several centres of river-borne commerce. Most overland trade was carried out via the Khyber Pass connecting the Punjab region with Afghanistan and onward to the Middle East and Central Asia.[36]

The period coincided with greater use of mechanical technology in the Indian subcontinent.[citation needed] From the 13th century onwards, India began adopting some mechanical technologies from the Islamic world, including gears and pulleys, machines with cams and cranks.[38] The worm gear roller cotton gin was invented in the Indian subcontinent during the 13th and 14th centuries,[39] and is still used in India through to the present day.[40] The incorporation of the crank handle in the cotton gin first appeared in the Indian subcontinent some time during the late Delhi Sultanate or the early Mughal Empire.[41] The production of cotton, which may have largely been spun in the villages and then taken to towns in the form of yarn to be woven into cloth textiles, was advanced by the diffusion of the spinning wheel across India during the Delhi Sultanate era, lowering the costs of yarn and helping to increase demand for cotton. The increasing use of the spinning wheel, and the incorporation of the worm gear and crank handle into the roller cotton gin, led to greatly expanded Indian cotton textile production.[42]

The economy in the Indian Subcontinent performed just as it did in ancient times, though now it would face the stress of extensive regional tensions.[48] Parthasarathi estimated that 28,000 tonnes of bullion (mainly from the New World) flowed into the Indian subcontinent between 1600 and 1800, equating to 30% of the world's production in the period.[49]

An estimate of the annual income of Emperor Akbar's treasury in 1600 is $90 million (in contrast to the tax take of Great Britain two hundred years later in 1800, which totaled $90 million). The Indian subcontinent region's economy was estimated to be the 2nd largest in the world in 1600, only below China.

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