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Facets of indias economy and her society volume i recent economic and social history and political economy

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Facets of India's Economy and
Her Society Volume I

‘Professor Raghbendra Jha is the right scholar and economist to take readers through the
development of the Indian economy. Readers will be in good hands.’
—Edmund Phelps, Columbia University, USA, winner of the 2006
Nobel Prize in Economics
‘This two-volume study on India’s economy and society by Professor Raghbendra Jha
skilfully combines high quality analytical scholarship, and nuanced exposition of empirical evidence to bear on India’s development policies and challenges. As linking of economy and society is increasingly recognised as essential for addressing policy challenges by
the current phase of globalisation, this study should be valuable not just for those studying India, but also for those interested in global developments.’
—Mukul Asher, National University of Singapore, Singapore


‘Over the years, I have benefited from reading the works of Professor Raghbendra Jha,
and from teaching from them. I enthusiastically recommend these two volumes to you.’
—Raaj Kumar Sah, University of Chicago, USA
‘It is perhaps the best and most scholarly contribution to understanding the Indian
economy and society. Its rich historical perspective and a profound understanding of
how India has evolved into a major economic power set standards of scholarship and
analytical rigour that will be hard to surpass.’
—Raghav Gaiha, University of Manchester, UK
‘India is critical for the world. Knowing India is vital. This book is a tour-de-force review of
the fundamental topics on the Indian political economy and society that are relevant for any
committed social scientist to be aware of. Raghbendra Jha is one of the leading contemporary India scholars globally, and he has conscientiously put together the materials in a careful
and structured way that will find substantial and immediate user acceptance worldwide.’
—Sumit K. Majumdar, University of Texas at Dallas, USA


Raghbendra Jha

Facets of India's
Economy and Her
Society Volume I
Recent Economic and Social History
and Political Economy


Raghbendra Jha
Arndt-Corden Department of Economics
Australian National University
Acton, Australia

ISBN 978-1-137-56553-2    ISBN 978-1-137-56554-9 (eBook)
https://doi.org/10.1057/978-1-137-56554-9
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To Mother India and Mataji with love


Preface

These two volumes cover aspects of Indian economy and society. They
take a long view of both and try to position them on a broader cultural
and historical canvas. These are the most important characteristics that
distinguish this work from the vast literature that already exists about
India.
India has a continuing cultural history spanning about 7000  years.
The country has some key beliefs and practices that have survived internal challenges and encounters with hostile external civilizations over several millennia. In the process, a composite culture has also grown,
testifying to India’s ability to absorb and assimilate external ideas and
practices in a largely peaceful manner, even when these ideas and practices are imposed in an aggressive fashion.
Even since attaining independence from foreign rule on August 15,
1947 and declaring herself a democratic republic on January 26, 1950,
India has faced a multitude of problems of a scale and intensity that
would test the most mature of societies. These have included intense mass
poverty and hunger, very poor literacy and educational abilities of the
population, the task of uniting a country with scores of languages and
ethnicities ruled by different entities for decades and persistent threats of
external aggression, to name just a few. At a deeper level, India has had to
regain her self-confidence and rediscover her ancient cultural moorings in
order to define the kind of nation she wants to be in the future. Unlike
vii


viii  Preface

her large and powerful neighbor to the north, India chose to address her
challenges within a pluralistic democratic framework.
The present work is an attempt to give an account of how India has
been meeting these challenges and how things are expected to evolve in
the future. This is clearly a hopelessly difficult task to accomplish fully
within the confines of two volumes. Therefore, they concentrate on key
aspects of India’s economy and society; hence their title. These volumes
constitute a narrative—my narrative—on India’s economic and social
development and do not profess to be exhaustive. They are also meant to
introduce the reader to the vast literature on the subject. That said, they
are written clearly and simply, so students (both graduates and undergraduates) of social sciences and general readers alike can use them to
learn about India.
The selection of topics has been made keeping this in mind. Volume I
is entitled Facets of India’s Economy and Her Society: Recent Economic and
Social History and Political Economy. It begins with a section entitled
“India’s economy in historical and spatial perspective.” This presents a
long view of the performance of the Indian economy, and then discusses
key aspects of the country’s population, land and labor, before moving on
to human development. The impact of Muslim rule is considered next,
and then the state of the Indian economy under British rule is discussed.
Economy and society were deeply affected by India’s struggle for freedom, so one chapter is devoted to an account of this.
The second section, “Basic Structure of India’s Governance,” contains
two chapters that deal with India’s political economy. The first covers the
Indian Constitution and basic structure of governance; the second provides a brief overview of major economic and political developments in
independent India.
Volume II is entitled Facets of India’s Economy and Her Society: Current
State and Future Prospects. It is divided into three sections. The first is
entitled “Principal sectors of the Indian economy” and contains three
chapters. These discuss the performance and prospects for India’s agriculture, manufacturing and services sectors.
The second section is entitled “Emerging issues in India’s economy,”
and this consists of four chapters. The first discusses India’s links with the
external world through international trade, investment, migration and


 Preface 
  

ix

remittances. Since the onset of major economic reforms in 1991 regional
inequality across Indian states has increased. Hence, the next chapter discusses the evolution of regional inequality in India and the role of indirect tax reform and vertical fiscal transfers. A discussion of the newly
instituted Goods and Services Tax is also included. The next chapter discusses India’s performance in education and health services and suggests
some policy initiatives in these areas. The final chapter overviews the state
of the environment.
The third and final section, entitled “Some aspects of India’s society
and prospects for the future,” consists of three chapters. The first discusses gender issues, the second intercommunity relations and the last
future prospects.
When writing about the economy and society of a country as complex
as India’s it is important to remember that the country represents a continuing ancient culture: Hindu civilization. Indeed, this is the dominant
reason for India’s cultural unity even at those times when the country did
not constitute a single sovereign geographical entity and faced continuous assault from hostile invaders and settlers. This cultural continuity has
had deep influences on, among other things, social relations, laws,
­attitudes toward science, progress, policy, and people’s response to economic incentives. Hence, these books will often allude to cultural issues
and Hindu scriptures. To accomplish this I have studied and attempted
to absorb the major Hindu scriptures, and to dwell on them. I have also
studied Shri Guru Granth Sahib—the holy book of the Sikhs. During this
process, I was surprised to learn that many religious practices are actually
gross aberrations. It is my conviction that overlooking the true tenets of
India’s civilization and concentrating on the aberrations, as some treatises
on the country’s economics and politics have done, does not help our
understanding of developments. We can’t discuss a country with an
ancient culture, which is even now at the core of the country’s civilization, by ignoring that culture.
When writing a work such as this, it helps if the author can have a
broad perspective on and understanding of the history and traditions of
the country. This is what my former professor at Columbia University,
Ronald Findlay, told me when he was visiting my department at the
Australian National University in 2012. He had confidence that I had


x  Preface

these two characteristics and thus encouraged me to write such a book;
but hr is clearly not responsible for its contents! I would argue that my
early education in India, and later teaching experience in various leading
economics educational institutions (Delhi School of Economics, Indian
Institute of Management, Bangalore, and Indira Gandhi Institute of
Development Research) in India and working on topics related to the
Indian economy have kept me connected with my roots. At the same
time, my long experience in teaching in the USA (Columbia University
and Williams College), Canada (Queen’s University), Australia (Australian
National University) and the UK (University of Warwick) has hopefully
provided me with the distance and the perspective needed to view Indian
issues objectively.
Having completed these volumes I now realize that I could not have
done so without a lifetime of reading, introspection and meaningful dialogue with people with wide experience and expertise. As a result, I have
run up a long list of debts. First and foremost, I would like to thank my
dear wife, Alka, who has long been an excellent sounding board for my
ideas and has contributed much to the substance and the arguments
made here. Her contributions to this book and to our life together have
been truly immeasurable and I cannot express them in words. Suffice it
to say that she and our dear son, Abhay, have made the task of writing
this book an absolute delight. I would also like to thank my many friends,
current and former students and collaborators who have influenced my
thinking on the issues discussed here and also helped in other ways. I will
mention only a few of them here. They include Sures Jain, K.V. Bhanu
Murthy, Anurag Sharma, Ashima Goyal, Gerald Epstein, L. Sridharan,
Tulsi Tawari, Raghav Gaiha, Hari Nagarajan, Duc Nguyen Truong,
Nguyen Hieu, Hai Anh La, Tu Dang, (the late) D.P. Chaudhuri and (the
late) Ashok Seth. None of these fine people is responsible for the content
of this work. The comments of anonymous referees have also been helpful. The stimulating and supportive working conditions at Arndt-Corden
Department of Economics, Australian National University, have been
invaluable in helping me to design and complete this work.
I should like to take this statistically improbable opportunity to thank
and honor Edmund S. Phelps, my PhD supervisor at Columbia University.
Professor Phelps, a Nobel Laureate and arguably one of the most imagi-


 Preface 
  

xi

native economists of our time, taught me to appreciate that at a deep level
economics is about human beings. Hence, our analysis must embody not
just scientific precision but also a strong concern for the people to whom
this analysis is addressed.
This is the fourth time I have published with Palgrave Macmillan and,
as in the past, it has been a pleasure to work with them. Laura Pacey,
economics editor, has been very helpful with her time and advice since
this work’s initial inception. Clara Heathcock and other professional staff
at Palgrave have been most generous in addressing any problems and
responding to all queries.
I have tried to cover considerable ground in this work, from history to
politics to culture, arts, societal affairs and, most prominently, economics. Perhaps enough justice has not been done to all of these areas, but I
would argue that this is probably impossible to deliver in a single book.
Nevertheless, I have tried to build up a cogent argument that links them
all, but shortcomings will remain. To quote the legendary nineteenth-­
century Urdu poet Ghalib Mirza Asadullah Khan:
Hazaaron khwahishen aisi ke har khwahish pe dam nikle
Bohat niklay mere armaan, lekin phir bhi kam nikle
Thousands of desires, each worth dying for…
many of them I have realized … yet I yearn for more…

I do hope readers find these volumes stimulating reading.
Acton, Australia
November 2017

Raghbendra Jha


Contents

Part I India’s Economy in Historical and Spatial Perspective    1
1Introduction to Volume I and India’s Gross Domestic
Product over the Long Run   3
1.1Introduction: Indian Gross Domestic Product Prior
to 1947  3
1.2India’s GDP since Year 0 AD   5
1.3India’s GDP under British Rule   9
1.4Indian Economy at Independence  12
1.5Indian GDP Since Independence  13
1.6Regional Variation in Indian GDP  18
1.7India’s Performance with Respect to International Trade  21
1.8Saving, Investment and Productivity  23
1.9Conclusions  26
References  28
2Key Aspects of India’s Population, Land and Labor  31
2.1Introduction and Background  31
2.2India’s Population  33
2.3Population’s Dependence on Agriculture  46
xiii


xiv  Contents

2.4Some Characteristics of India’s Labor Market  56
2.5Conclusions: A Final Word on Employment and Wages  68
References  70
3Human Development in India: Levels and Inequalities  73
3.1Introduction  73
3.2The HDI and India’s Performance on It  74
3.3India’s Performance with Regard to Poverty
and Inequality: Some Basic Results  78
3.4Two Controversies Relating to the National Poverty Line  85
3.5Hunger, Inequality and Poverty in India  87
3.6Conclusions
103
References 103
4Islamic Invasion and Occupation of India 107
4.1Introduction: Pre-Islamic Foreign Invasions of India
107
4.2Chronology of Muslim Invasion of and Rule in India
109
4.3Policy of Muslim Rulers in India
117
4.4Salient Features of the Economy under Mughal Rule
118
4.5Conclusions
119
Appendix 120
References 123
5India’s Economy Under the Rule of the East India
Company and the British Crown 125
5.1Introduction
125
5.2British Rule in India
126
5.3India’s Deindustrialization under British Rule
131
5.4Economic Drain from India
138
5.5Land Tenure Systems in British India
142
5.6Famines in India
145
5.7Conclusions
150
Appendix 152
References 156


 Contents 
  

xv

6India’s Quest for Freedom 161
6.1Introduction: Revolts Against the British Before 1857161
6.2The Uprising of 1857163
6.3Laying the Foundations of the Next Phase
of the Freedom Struggle
166
6.4The Freedom Struggle to 1919169
6.5The Freedom Struggle 1919–1935177
6.6Indian Freedom Struggle 1935–1942 and the Rise
of M.A. Jinnah183
6.7Indian Freedom Struggle 1942–1947 and the Trauma
of Partition189
6.8Conclusions
199
Appendix 200
References 206

Part II Basic Structure of India’s Governance

 209

7An Overview of the Governance Content of India’s
Constitution 211
7.1Introduction
212
7.2Basic Structure of Governance in India
212
7.3Constitutional and Legal structures
219
7.4Structure of Taxation in India
228
7.5Conclusions
241
Appendix: On Some aspects of the Special Status of the State
of Jammu and Kashmir  242
References 245
8The Political Economy of Economic Policymaking in India  247
8.1Introduction
247
8.2Political Hegemony and Central Planning: The Nehru
Years251


xvi  Contents

8.3Slow Economic Growth and the Triumph of Left-­
Oriented Policies: Shastri as Prime Minister and the First
Term of Indira Gandhi
261
8.4India’s First Non-Congress Government, Ensuing
Political Instability and Mrs. Gandhi’s Second Term
268
8.5Inherited Political Power, Its Demise and Subsequent
Instability: Rajiv Gandhi, V.P. Singh
and Chandrashekhar as Prime Ministers
271
8.6A Period of Deep Reforms, Rollback and Reforms
Again: The Prime Ministership of P.V. Narasimha Rao,
H.D. Dewe Gowda, I.K. Gujral and the First Phase
of A.B. Vajpayee279
8.7The Second Phase of the Vajpayee Years and the First
Term of Manmonhan Singh: 1999–2004
and 2004–2009286
8.8Manmohan Singh’s Second Term and the First Three
Years of Modi’s Government
290
8.9Ongoing Prime Ministership of Narendra Modi
294
Appendix 299
References 310
Index 313


List of Figures

Fig. 1.1 Coefficient of variations in real state domestic product per capita. Source: Author’s calculation based on data from Handbook
of Statistics of the Indian Economy, Reserve Bank of India. Data
for 1993–1994 to 1998–1999 at 1993–1994 prices, from
1999–2000 to 2003–2004 at 1999–2000 prices and from
2004–2005 to 2013–2014 at 2004–2005 prices
Fig. 2.1 Total fertility rates in India and constituent major states: 1961–
2001. Source: Author’s computation from Census of India
1961, 1971, 1981, 1991 and 2001
Fig. 2.2 Child population (0–14 years with sub-groups) of India by
gender and age groups in 1951–2001 with projections to 2026.
Source: Author’s compilation from Census of India: various
issues including Census of India 2001: Population Tables and
Population Projections for India and States 2001–2026
Fig. 2.3 Change in child population (0–6 years) (unit: million children). Notes: (*) 1991 census was not held. Sources: Author’s
compilation from Census of India 1991, 2001, 2011 and calculations from NSS 50th and 61st Rounds
Fig. 3.1 Components of the HDI
Fig. 3.2 Visualizing poverty
Fig. 3.3 The Lorenz Curve and the Gini coefficient

21
38

44

45
75
79
80

xvii


xviii 

List of Figures

Fig. 3.4 Coefficient of variation of poverty gap. Source: Author’s calculations based on National Sample Survey data. Note: Traditional
poverty line is used here
85
Fig. 7.1 Structure of government in India
217
Fig. 7.2 Hierarchy of civil and criminal justice system in India
227


List of Tables

Table 1.1

Five year averages of annual growth of real GDP per capita
in major economies
8
Table 1.2 Characteristics of growth rate and variability of real GDP
and other variables (at 1948–1949 prices)
10
Table 1.3 Average sectoral shares in real GDP: 1900–1901 to 1946–
1947 (%)
11
Table 1.4 Growth of real GDP and other macro-variables after independence (base for real GDP growth calculation 2004–2005
prices)14
Table 1.5 Sectoral shares after independence
16
Table 1.6 Agricultural and allied sector: shares in GDP and rural
population17
Table 1.7 Variation in annual real state domestic product per capita
per year
19
Table 1.8 Trade as a percentage of GDP
22
Table 1.9 Gross domestic saving and capital formation in India
24
Table 1.10 Constituents of saving and gross capital formation in India 25
Table 2.1 Population and its growth in India: 1901–2011
34
Table 2.2 Religious composition of populations of India, Bangladesh
and Pakistan by percentage of population: 1901–1991
36
Table 2.3 Total fertility indicators: India and major states 2013
39
Table 2.4 Household size, number of children (0–14) in poor and
non-poor households in India
40
xix


xx 

List of Tables

Table 2.5
Table 2.6
Table 2.7
Table 2.8
Table 2.9
Table 2.10

Table 2.11
Table 2.12
Table 2.13
Table 2.14
Table 2.15
Table 2.16
Table 2.17
Table 2.18
Table 2.19
Table 2.20
Table 3.1
Table 3.2
Table 3.3
Table 3.4
Table 3.5
Table 3.6
Table 3.7
Table 3.8

Child population (0–14 years with sub-groups) of India by
gender and age groups in 1951–2001 with projections to
202641
Gender bias in child population (0–6), social groups and
child poverty in India 1993–1994 to 2011
43
Characteristics of agricultural land utilization in India
47
Land and labor productivity in Indian agriculture in
comparative perspective
48
Number and area of operational holdings by size group
50
All-India proportions of households of different social
groups possessing up to 1 hectare of land (%) and proportion of non-agriculture household by major source of
income (rural) (%) (1993–1994, 1999–2000, 2004–2005
and 2009–2010)
51
Population and agricultural workers
52
Rural and urban population in the censuses since 1961
53
Annual growth of GDP by industry (at one digit level) at
2004–2005 prices
55
Labor market participation rates in India
57
Labor market participation rates for females in India in
comparative perspective
57
Vulnerability of unemployment: India in comparative
perspective59
Informalization in India’s labor market
60
MCWS employment estimates from NSS rounds (million) 63
Unemployment in India various years
64
Different measures of unemployment in India
65
Example for calculating HDI
76
Characteristics of countries
76
India’s HDI score 1980–2015
77
Percentage and number of poor using Tendulkar
methodology83
Coefficients of variation of the HCR in the rural and urban
sectors and in the aggregate
84
Concentration of poverty in India
85
Gini coefficient of distribution of consumption for select
states and all India
89
Profile of inequality and poverty in India
93


  List of Tables 
  

Table 3.9

xxi

Poverty in India and states 2009–2010 and 2004–2005
using TCR methodology
94
Table 3.10 Number and percentage of population below poverty line by
states 2011–2012: Tendulkar methodology
100
Table 4.1 List of Mughal emperors of India
120
Table 5.1 List of British Viceroys and Governors-General of India and
Pakistan152
Table 6.1 List of presidents of the Congress Party
200
Table 7.1 Population, area and political characteristics of states and
union territories
216
Table 7.2 Scheduled languages in India and proportion of people
speaking them: 2001
219
Table 7.3 Central government revenues for select years (Rs. Crores, 1
crore = 10 million)
234
Table 7.4 Consolidated central government expenditures for select
years (Rs. Crores)
236
Table 7.5 Consolidated receipts of the states (Rs. Crores)
238
Table 7.6 Combined revenue and capital expenditures of state governments (Rs. Crores)
239
Table 8.1 GDP, GNP per capita and capital formation (billions of
2004–2005 rupees and percentages) the Nehru years
257
Table 8.2 CPI annual inflation in India (% per  annum January to
December)258
Table 8.3 GDP, GNP per capita and capital formation (billions of
2004–2005 rupees and percentages) during the Shastri and
Mrs. Indira Gandhi years before the emergency
265
Table 8.4 GDP, GNP per capita and capital formation (billions of
2004–2005 rupees and percentages) The Indira Gandhi and
Morarji Desai/Charan Singh years
270
Table 8.5 Economic performance of India during Rajiv Gandhi,
V.P. Singh and Chandrashekhar years
278
Table 8.6 Economic performance of India during the Narasimha Rao,
Deve Gowda and I.K.  Gujral governments and the first
phase of Vajpayee’s prime ministership
284
Table 8.7 Economic performance of India during the second phase of
Vajpayee’s prime ministership and Manmohan Singh’s first
term287
Table 8.8 Economic performance of India during the second phase of
Manmohan Singh’s prime ministership
291


xxii 

List of Tables

Table 8.9 List of Prime Ministers of India and their respective tenure 299
Table 8.10 List of Finance Ministers of India, their party affiliation and
tenure300
Table 8.11 List of deputy chairmen of the Planning Commission/Niti
Ayog303
Table 8.12 List of Finance Commissions of India and their
chairpersons304
Table 8.13 List of Governors of the Reserve Bank of India
304


Part I
India’s Economy in Historical
and Spatial Perspective


1
Introduction to Volume I and India’s
Gross Domestic Product over
the Long Run

1.1 Introduction: Indian Gross Domestic
Product Prior to 1947
Will Durant and Friedrich Hagel, two of the finest intellectuals of the
West, had very different views of Indian history. Hagel (1821–1831,
reprinted in 1975) stated that anyone with even a rudimentary knowledge of the treasures of Indian literature and spiritual achievements would
conclude that India had no history, whereas Durant (1930) wrote that
Indian civilization went back to 3500 bc, and that at no time in history
was the country without a civilization. These contrasting statements
reveal the drastic change in European views of India over a century. In
particular, Durant meticulously recorded some of the attainments of
Indian civilization, beginning with the observations of Megasthenes
(Alexander’s historian who went with him to India in 326 bc).
Megasthenes expressed amazement at the cultural achievements of the
people living on the banks of the Indus, considering their achievements
to be comparable in every way to the civilizational and artistic attainments of the Greeks.
Yet it is true that during the tumultuous years of foreign occupation of
India there was little recorded history that was intelligible to Europeans.
© The Author(s) 2018
R. Jha, Facets of India’s Economy and Her Society Volume I,
https://doi.org/10.1057/978-1-137-56554-9_1

3


4 

R. Jha

Of course, this changed somewhat in the later years of British occupation
and after independence. Now there is a substantial literature on Indian
history with several, competing, visions of India’s past. Indeed, some
would argue that the country’s history is still viewed through imperialistic
or left-wing prisms, as if one of the world’s oldest civilizations did not
have the capacity to tell its own history.
This is a book about India’s economy and society, however, which
means it must concern itself (at least) with recent economic and social
history. The novelty in this approach is that it takes as axiomatic that any
meaningful study of India’s economic history cannot be divested from
the prevailing social conditions or India’s deep-rooted spiritual heritage.
Indeed, to most Indians India is more than a tract of land. It represents
an unbroken culture that is at least 7000 years old and encompasses the
entire land mass of India, influencing people in other parts of the world
as well.1 As distinct from the political or linguistic unity espoused by
Western countries, India has always presented a deep concept of cultural
unity, which is capable of absorbing immense diversities and indeed is
strengthened by such diversity. Over several millennia India has had
trade, investment and migration relations with various parts of the world,
and thus its economy and society have been affected by the rest of the
world. I recognize that covering all these issues in one volume is a daunting task, so will concentrate on selected facets of India’s economy and
society and their relations with the world; hence the title of this book.
This chapter begins with a discussion of the most important indicator
of economic performance—gross domestic product (GDP). In Chap. 2 I
explore key issues of population, land and labor. In Chap. 3 I discuss
broader aspects of human development beyond GDP.  Some aspects of
the impact of Muslim rule in India are considered in the next chapter,
after which the state of the Indian economy under British rule is discussed. The shape of Indian economy and society was deeply affected by
India’s struggle for freedom, so one chapter is devoted to providing an
account of India’s struggle for freedom. The next two chapters deal with
India’s recent political economy, the first with the Indian Constitution
and basic structure of governance and the second with major economic
and political developments in independent India.


  Introduction to Volume I and India’s Gross Domestic Product… 

  5

This chapter is organized as follows. In Sect. 1.2 I examine historical
data on India’s share of world trade and the rate of growth of real GDP. In
Sect. 1.3 I explore the performance of Indian GDP under British rule,
whereas in Sect. 1.4 I provide a quick snapshot of the Indian economy at
the time of independence. In Sect. 1.5 I lay out the basic characteristics
of India’s GDP since independence, and in Sect. 1.6 I examine regional
inequality in India. In Sect. 1.7 I explore India’s share of international
trade in GDP compared with that for other countries/country groupings.
In Sect. 1.8 I provide a brief description of the behavior of savings, investment and productivity in recent years, and Sect. 1.9 concludes.

1.2 India’s GDP since Year 0 AD
Comprehensive and wide-ranging data on national income, labor, trade
and investment have been complied and commented upon by Maddison
(2006).2
In the year 0 AD India’s share of world GDP was 32.9%, falling to
28.9% in 1000, 24.5% in 1500, 22.6% in 1600, 24.4% in 1700, 16.0%
in 1820, 12.2% in 1870 and 7.6% in 1913. Islamic occupation and
British colonialism took India’s economy backwards. After independence
this share improved to 4.2% in 1950 but slipped to 3.1% in 1973, recovering somewhat to 5.0% in 1998 (after the 1991 liberalization). In contrast, China’s share of world GDP was 26.2% in year 0 AD, 22.7% in
1000, 25.0% in 1500, 29.2% in 1600, 22.3% in 1700, 32.9% in 1820,
17.2% in 1870 and 8.9% in 1913. In 1950, after the Revolution, China’s
share of world GDP had fallen to 4.5%. It was 4.6% in 1973 but had
more than doubled to 11.5% by 1998.
The UK’s share of world GDP was 1.1% in 1500, 1.8% in 1600, 2.9%
in 1700, 5.2% in 1820, 9.1% in 1870 and 8.3% in 1913. Imperialistic
rule over colonies was good for the UK. Its share of world GDP slipped
to 8.3% in 1913 (largely because of the rise of the USA), to 6.5% in
1950, 4.2% in 1973 and 3.3% in 1998. At the time of India’s independence, the UK share of world GDP was much higher than that of India’s.
In 1500 the USA’s share of world GDP was 0.3%, 0.2% in 1600 and
0.1% in 1700, but then it sharply rose to 1.8% in 1820, 8.9% in 1870,


6 

R. Jha

19.1% in 1913 and 27.3% in 1950. This dropped marginally to 22.0%
in 1973 and 21.9% in 1998. Western Europe’s share of world GDP has
also climbed more or less steadily over time. It was 10.8% in the year
0 AD, 8.7% in 1000, 17.9% in 1500, 19.9% in 1600, 22.5% in 1700,
23.6% in 1820, 33.6% in 1870 and 33.5% in 1913. This slipped after
the Second World War to 26.3% in 1950, 25.7% in 1973 and 20.6% in
1998, the war taking a substantial toll on European economies alongside
a sharp growth in the US economy.
The former Soviet Union’s share of the world economy rose steadily
over this period. It was 1.5% in the year 0 AD, 2.4% in 1000, 3.4% in
1500, 3.5% in 1600, 4.4% in 1700, 5.4% in 1820, 7.6% in 1870, 8.6%
in 1913, 9.6% in 1950 and 9.4% in 1973. This dropped to 3.4% in 1998
after the collapse of the Soviet Union.
Japan’s share of world GDP was 1.2% in the year 0 AD, 2.7% in 1000,
3.1% in 1500, 2.9% in 1600, 4.1% in 1700, 3.0% in 1820, 2.3% in
1870, 2.6% in 1913 and 3.0% in 1950 (after the Second World War).
After this it rose sharply to 7.7% in 1973 and 1998.
Therefore, India had the largest share of world GDP until almost 1500.
Its experience with Mughal rule reduced this share (the Mughal Empire
was founded by Babur in 1526 and the rule of the East India Company
is considered to have begun in 1757 after the Battle of Plassey).
Nevertheless, even in 1700 India accounted for nearly a quarter of world
GDP whereas the UK accounted for just 2.9%. During the colonial
period India’s share of world GDP dropped precipitously to just over 4%
in 1950, whereas the UK’s share rose sharply, reaching a peak of 9.1% in
1870 before dropping slightly in 1913 and then a bit more sharply, probably as a result of the two world wars. In Maddison’s calculations no single economy has ever accounted for a larger share of world GDP than
India’s did in the year 0 AD.
Indian GDP growth did not reach 1% during the colonial period but
picked up after independence, particularly in the last period considered.
UK GDP growth was in excess of 2% after 1820 and never slipped below
1%.
For Western Europe, the annual average compound growth rate was
−0.01% (0–1000), 0.30% (1000–1500), 0.41% (1500–1820), 1.65%
(1820–1870), 2.10% (1870–1913), 1.19% (1913–1950), 4.81%


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