How and Why India’s economy fell from 1000 BC to 1947 AD

India, what we see today as a growing economy was once the contributor to 40% of the world’s GDP when countries like USA didn’t exist and European nations were our major trade partners. This declined to 3% of contribution to world’s GDP in 1947.

economy fell drastically

GDP share of India reduced from 40% in 1000 AD to 3% in 1947 AD

What really caused the decline in Indian Economy? Are Britishers solely responsible for this? Or other factors. In this answer I have divided the deterioration of the economy in three parts:-

  • Before 1000 AD
  • 1000-1757 AD
  • After 1757 AD.


Indian Economy before 1000 AD

During this time, the country which had the highest population and good land was the richest. While China was a major economic power then, India had lesser droughts and famines, a lot of unused resources making it one of the world’s leading economy at that time.

Indian economy was dependent on agriculture since ancient times. During the reigns of King Ashoka, Gupta and the Chola Empire, the entire sub-continent came under one rule. These kings ruled wisely, treated their subjects well, were tolerant to all religions and taxed on the basis of produce (1/6th of the total produce).

These kings were equally ambitious. They used to send religious missionaries to various parts of the world, which helped them develop good trade links with these nations effectively.


Indian Economy between 1000 – 1757 AD

During this era, many Central Asian invaders were fascinated by the wealth India had. These forces used to plunder resources in temples, from people and leave back; not residing here as permanent citizens of India.

By this time, Indian weakness was exposed to the world. There was too much of in-fighting between the kings on the land, helping foreign invaders settle peacefully in India.

Muhammed Bin Tughlaq had unified the nation again under one single ruler. But his oppressive policies like shifting the capital, religious intolerance, issuing of different currencies which were easy to duplicate, etc… created an irreparable damage in the Northern Part of India. Shifting of an major economic center like Delhi, made us more prone to foreign attacks and a damage to existing trade routes.

But still our economy didn’t deteriorate much. Why? Because there was a different Kingdom ruling in the south.

The Vijayanagar Empire came into existence in 1336 AD was the last Hindu Kingdom in India, religiously tolerant, had the world’s second largest city to Beijing in its prime (Hampi), a powerful army and had overseas territories in Sri Lanka at that time because of superior navy infrastructure. The Vijayanagar Empire encouraged art, literature and trade during its reign.

But after the death of Krishna Deva Raya of the Tuluva Dynasty in 1529 and poor management by his immediate successor Aliya Deva Raya, by 1550s Vijyanagar Empire’s influence reduced drastically. Then came the most able Mughal Emperor Akbar who occupied the throne at the age of 13 after his father’s untimely death, introduced land reforms and proper taxation system, helped India trade with the South East Nations and the Arabs effectively, because the entire sub-continent was under one single ruler. The seeds sowed by Akbar became fruitful in Shah Jahan and Aurangzeb rule, helping India continuously contribute 1/4th of world’s economy.

When the Muslim rulers came to rule in India, they weren’t tolerant to all religions, started unfair policies against their non-Muslim subjects like tax for visiting pilgrimages, high taxation on produce, rape, loot, partial law and order, made a faction of Indians poor, which was not seen before 1000 AD. The kings enjoyed a lot which can be witnessed in massive structures like Taj Mahal and Red Fort.

Indian Economy after 1757 AD

After defeating Siraj Ud Daullah in 1757, the British came in complete power in India. They ruled the granary of India (Bengal) very wisely for their convenience and the crown. High taxation on land produce, imposing crops for growing on the peasants which were very fruitful to them (cash crops), changing the entire land reform system, etc… was a common thing British did in India.

Famines were common in Ancient India, but these famines were handled wisely by the rulers. British used extremist policies against peasants for extraction of tax, which made them severely brink financially. Mass Killing of people in the famines which were not prevalent before, became a common trend in every five years in India.

But still, India was a major exporter of goods, getting good revenue in terms of gold. Why there was a sudden decline?

Before the Industrial Revolution, as said earlier the country which had large tracts of land and huge population was always richer than the other nations in the world. The United Kingdom had a population of 5 million in 1600 while India had a population of 140 million. The equation sits well there.

Come Industrial Revolution, work was done faster and effectively using machines, but still India had cheaper labor and a large workforce which was more effective than Industrial machines.

Then came British’s extremist extraction policy. India had a lot of trade surplus (because still India was under Company Rule), while British just lost its profitable colony in America, creating a lot of monetary issues for the colonial power. The trade surplus of India was accommodated with losses Britain was facing due to colonial expansion, which led to breakdown of the economy.

While some economist argue that Industrial Revolution not implemented in India was the main reason for the decline in the economy and not British colonization. I agree to it partially. India has been a conservative society since ancient times. They wouldn’t accept new machines in place of manual labor existent in the country. But did British ever try industrializing India? No.

Rather they killed the entire textile industry by 70–80% taxation on goods produced in India, while import of manufactured goods from Britain for almost no fee. The took cotton from India, processed it into finished goods and sold it back in India. They only used India’s land for growth of profitable crops and as agriculture is an labor intensive process, they killed all other industries so that the same workforce can be accommodated in growing crops.

By 1820, they almost killed all other Industries in India, kept agriculture growing and brought many kingdoms in the Sub-Continent into in-direct influence through the Subsidiary Alliance (foreign affairs taken care by British and internal matters by the King for a fee). But still, Indians were rooted into their culture. In-spite of all policies, Indians were proud about their art, science, education and culture.

Here comes the final nail in the coffin English Education Act 1835, to spread English education in India and killing the existing school of education India had.

Why was the English Education Act introduced in India?

Indians would have never accepted Industrial Revolution. Hard fact right. British had established a good colony but lacked the necessary infrastructure like trains and communication. They needed these services to do business effectively. If we degrade the existing education in India, we can do business peacefully and rule India for next 200 years. Ayurvedic treatment, religious education, etc… were destroyed within years, helping them establish better links with Indians.

British always say, We never conquered India all on our own, Indians helped us to do so. With uniform language for communication, they were able to create the necessary inferiority among masses.

This resulting to permanent decline in our economy to such an rate that our economy was growing constantly at 1% from 1880 to 1947, while developed nations exploded with growth increasing their share in contributing to world’s economy.

The other reason for growth was demand for Western goods. Goods produced in the East weren’t of great quality compare to products from US and Europe, shifting the demand for these goods. Low population and better infrastructure helped them grow exponentially.

In brief How did the Indian economy disintegrate:-

  1. India’s economy gradually started to decline after 1000 AD because of bad rulers who were very religiously extreme led to change of wealth hands from masses to the elite.
  2. British shifted this wealth from the elite to the crown by using perfect policies.
  3. India would have never adopted Industrial Revolution would anyhow lead to the decline of our economy, but if the decline would have happened in the rule of a native king, slow adoption of Industrialization would have happened. But British never had these intentions, neither supported entrepreneurs like Tatas to do business using new machines by imposing restrictions and lack of capital support.
  4. India is a land built on its culture which was mutilated by the British leading to no ground for new development of the economy.

GDP shows the total wealth of the country. Despite suppressed people during the 1000–1757 AD, our country was rich, but financially people became weak.

But yes, India would have been in a better situation due to Industrialization if British never came to India or had implemented it in India. Our IT sector is booming these days as we get coders for less than $150 per month. The same case would have been during the 1850s also. Machines would have troubled the existing workforce, but slowly situation would have been in control thanks to availability of cheap labor. Population was a boon then and can be a boon today with better policies and new-age entrepreneurs. When Germany can become one of the world’s successful nations despite two downfalls in a short period of time, then India can do it more easily and at a quicker pace.

Context above is an answer to the Question on Quora

What kept India as the wealthiest nation from 3000 BCE to 1757 and what caused the sudden decline? 


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