বিশেষ লেখা, Growth Story of Indian Economy - Past, Present and Future, Prof. Manjit Das,৪ৰ্থ বছৰ ৪ৰ্থ সংখ্যা

 Growth Story of Indian Economy - Past, Present and Future

Although Indian civilisation is more than 5000 years old, economic history of India is not clear. Many statisticians, historians, economists and researcher from other disciplines tried to trace the economic history of India. Among them, Angus Maddison, Jawaharlal Nehru, Shashi Tharoor, Subramanian Swamy, RC Dutta are prominent. Here, on the basis of their work, an attempt is made to trace the economic history of India from 1st AD to present day and also try to forecast its future. During 1st A.D. to 1000 A.D., India and China controlled the global economy and contribution of India towards global economy was the prominent one followed by China. However, contribution of India starts to decline as more civilization flourished in other parts of the world. In 1000 AD, India shares 28% of world GDP, followed by China with 22% of world GDP and Japan with 3% of world GDP. It means that alone three countries of Asia contributed more than half of the global GDP. Although India ranked top in the list of contributors to global GDP up to 1400 AD, share of India’s GDP to world GDP declined continuously. In 1500 AD, for the first time China surpassed India. Contribution of China to global GDP was $61 Billion which was 25% of Global GDP. India contributed $59 Biliion which was 24% of Global GDP. Japan ranked 3rd with a GDP of $7.7 Billion with 12% of world GDP. One main reason behind the fall of share of India towards global GDP may be due to several attack and loot by the Muslim rulers like Mahmud of Ghazni, Muhammad Bin Bakhtiyar Khalji, etc. from Middle East.  

Growth story of Golden bird India attracted European also. For the first time 1498, Portuguese came to India to trade followed by British in 1600, Dutch in 1602, Danes in 1616 and French in 1664. It was a self-sufficient economy.  J.T. Sunderland wrote “Nearly every kind of manufacture or product known to the civilized world- nearly every kind of creation of man’s brain and hand, existing anywhere, and priced either for its utility or beauty – had long been produced in India. India was a greater industrial and manufacturing nation than any in Europe or any other in Asia. Her textile goods-the fine products of her looms, in cotton, wool, linen and silk-were famous over the civilized world, so were her exquisite jeweler and her pottery, porcelains, ceramics of every kind, quality, colour and beautiful shape; so were her fine works in metal-iron, steel, silver and gold.” She had great architecture-equal in beauty to any in the world. She had great engineering works. She had great merchants, great businessmen, great bankers and financers. Not only was she had the greatest shipbuilding nation, but she had great commerce and trade by land and sea which extended to all known civilized countries. Such was India which the British found when they came to India.  R.C. Dutta Wrote “India in the 18th Century was a great manufacturing as well as great agricultural country, and the Indians handloom supplied the markets of Asia and Europe……….” 

In 1700 AD, India shares 23% of World GDP which was as large as all of Europe put together. India was a self-sustained economy. It produced almost everything that the society demanded. Farmers had to pay 1/3 to 1/6 of produce depending upon the crops to the king as tax. During those days, major industries of India were textile, ship-building and iron & steel.  Muslin of Dacca; Carpets of Lahore; Shawls of Kashmir; Embroidery works of Banaras were world famous. In industrial share, India’s share was 25%. The value of Bengal’s textile exports alone is estimated to have been around 16 million rupees in 1750. Silk export from Bengal were worth another 6.5 million annually till 1753.

At the initial stage, British East India Company encouraged Indian industries because they made money by exporting low cost and high quality Indian goods to England and other countries. However, British manufacturers in Britain did not like these activities of East India Company as demand for their own  products fell because of high price in the home market. British manufacturers put pressure on British Govt to impose high tax on Indian products to Britain and encouraged British manufacturers to sell in Indian market. After the battle of Plassey (1757), there was one-way free trade policy for British without tax in India while Indian had to pay tax. East India Company imposes 80% tariff on Indian textile/handicraft on Indian export in 1820. Export was impossible because of high price resulting from high tariff and control of ports by company. Indian market was flooded with machine made British product. In Bengal, they did not hesitate to break the thumps of the weavers. Carding, dying, printing and hand spinning start falling in India. British squeezed out foreign buyers too from Indian products. Consequently, India became net importer of textile for the first time. As well, India became an exporter of raw cotton to Britain in place of finished products. Export of raw cotton from India to Britain increased from 226.5 million lbs in 1850 to 920.1 million lbs in 1910.  

Steel and ship building industries also faced government made problems in India. British ship building companies could not compete with Indian.  Average life span of a Bengal built ship exceeded 20 years whereas English built vessels never lasted more than 11 or 12 years and often need repaired. As a result, freight of Indian made ships was lower than that of British resulting lower demand for British Vessels. It leads to rise in unemployment in ship building industry in Britain. Like textile manufacturers, British ship building companies petitioned British Parliament to ban Indian ship. The first legislative act in their favour came in 1813 and next in 1814. Thus, India’s once flourishing ship building industry collapsed and by 1850 was essentially extinct. In short, Britain’s industrial revolution was built on the destruction of India’s prosperous manufacturing industries.

Due to decline in industrialisation in India, craftsmen, artisans joined in agriculture resulting overburden on agriculture and disguised unemployment. British also introduced Zamindari system for collection of land revenue which adversely affected the farmers. There was no policy for improvement of agricultural productivity in India by the British. They encouraged commercialisation of agriculture like cotton, jute, indigo, sugarcane, oilseeds, tea, coffee, rubber, etc to feed their industries and profit through trade instead of food crops. As a result, there was shortage of food leading to poverty and famine in India. During 1850-1900, 2.8 crore people died in famines in India. Indians can not forget Bengal Famine of 1943 where 0.8 to 3.8 million people died (present day Bangladesh and West Bengal). 

In 1800, India’s GDP was $111 billion which was 16% of Global GDP while China’s GDP was $228 billion constituting 33% to world GDP. India at the time of independence had a GDP of $38 billion which was only 3% of world GDP. Industrial share was only 2%. People living below poverty line was 80% with a literacy rate of only 18%. Between 1765 to 1815, British extracted 18 crores Pound annually. Overall loot of British in India was US$ 3 trillion in terms of 2015 nominal price. Loot of British in India can be understood from one example. On Robert Clive first return to UK, he took in today’s value 23 million Pound which made him one of the richest man in England. In the year 1777, when he returned, he took in today’s value 40 million Pound.

As India became independent from British, it adopted a mixed economy. Planning Commission was set up in 1950 which was entrusted to set priority of the economy and accelerate growth of the devasted economy through Five-year plans. First five-year plan (1951-56) emphasized on agriculture with an overall growth target of 2.1 percent per year. However, it achieved a higher growth rate of 3.6% per year. In the year 1956, India adopted a socialistic pattern of society and plan followed the “Mahalanobis Model” emphasizing on rapid industrialization. In 1956, India adopted its New Industrial Policy replacing Industrial Policy of 1948. During this period, a good number of industries were set up in the public sector. During this planning period (1956-61), India achieved an annual growth rate of 4.3 percent against its target of 4.5%. From 1951 to 2012, India completed 12 Five year plans and several annual plans in between. During 1951 to 1975, annual growth rate of Indian economy was only 3% to 4% while during 1976-1990, annual growth rate was 5%. However, growth rate accelerated to 7% to 8% in the post LPG period (1991). During the tenure of Prime Minister Lal Bahadur Shastri, India started its Green Revolution and White Revolution which made India self-sufficient in agriculture and milk. Nationalization of major 14 banks in 1969 and 6 banks in 1980 during the tenure of Prime Minister Indira Gandhi as well as setting up of Regional Rural Banks 1972 onwards helped the growth of banking habit among the rural mass and the economy as a whole.  Information Technology and Telecom Revolution also pushed the economy. However, “Hindu Growth Rate” of Indian economy during 1947 to 1990 was due to License Raj, red tapism, Indo-Pak war, Indo-China War, draoght, etc. During the early 1990, India faced with high inflation, unemployment and poverty and low foreign exchange reserve. The collapse of the USSR significantly impacted India’s economy because of the USSR significantly impacted India’s economy because the Soviets were India’s major trading partner and a key supplier of low cost crude oil. India was receiving a huge remittance of foreign exchange from Indians working in Middle East, but the Gulf War sent thousands of Indian workers back home resulting in a huge shortage of foreign exchange. Consequently, India’s foreign exchange reserve fell to a low of $240 million, just enough to support only two weeks of imports. The IMF and the World Bank offered help to India in exchange for economic reforms. The Govt under the Prime Minister PV Narasimha Rao ran out of options and finally, had to change its closed door economic policies in 1991.  Since 1991, a series of reforms were introduced in India like financial reforms, fiscal reforms, land reforms, labour law reforms, structural reforms, etc. which have helped the growth of Indian economy. During the tenure of Prime Minister Narendra Modi, NITI Ayog replaced the Planning Commission in 2015. Govt introduced several programs like Make in India in 2014; Startup India in 2016; Goods & Service Tax in 2017, Atma Nirbhar Bharat in 2020, etc. which have helped India to become 5th largest economy in terms of GDP and 3rd in terms of Purchasing Power Parity in the world. Today, India is the 2nd largest producer of Mobile Phone and two wheelers. The automotive industry in India is the world’s  3rd largest by production and valuation. Today, India is called “Pharmacy of the World” as it is a major producer and exporter of Vaccine and medicine. In the field of agriculture, India is major producer and exporter of many agricultural, horticultural goods in the world. Based on the past experience of India after Independence, IMF predicted that India will become 3rd largest economy in 2027 in terms of real GDP in the world. We also hope India achieve its own past glory with its young minds.

Prof. Manjit Das

Department of Economics

Bodoland University

Kokrajhar, Assam