India: Future Past
When writing on India, it is tempting to cover a positive, concise and non-controversial topic. Several options appear attractive, from the short-term economic forecasts¹, to the improvements in India’s ease of doing business², to even the advent of India’s nouveau riche³. I enjoy reading these articles as much as the next person, but what remains in my mind afterwards is a far more nebulous question:
So what?
To be clear I am incredibly proud of what India has done recently. It took a relatively small change in policy to unleash the recent roar of prosperity. This chart does a succinct job of summarizing India’s recent success⁴:
However, we often gain a richer understanding of the achievements, but also the remaining challenges, when we add some context⁶. Developing a broader perspective can better explain the Indian national mood and inform policy today. I believe that a foundational step to developing this deeper comprehension is to consider India’s economic performance over time.
So let’s zoom out.
Zooming Out
Viewed on the broadest tapestry, India emerges, somewhat surprisingly for many, as history’s leading region. The following chart is one way of showing this. It indicates each region’s share of global GDP over time. (Disclaimer: these are estimates, given the relative lack of ancient data, produced by British quantitative macroeconomist Angus Maddison; see footnote for further discussion⁷.)
Importantly, notice the scale of the x-axis — about as much time is contained between the first two tick marks (the years 1 to 1000) as between the second and the last (the years 1000 to 2003). To measure economic influence one might consider the area under the curve. Taking account of the non-linear scale, one thing is clear:
India has been the most economically dominant region of all time.
How did India do it?
Of course the answer is more elaborate than a blog post can robustly articulate, but we may consider a few theories.
- Population: India had a high population relative to other countries: even assuming technology or productivity equivalence with other regions (as Maddison does), this automatically catapulted India to a leading global position. But what allowed such a large population to grow and interact successfully?
- Resources: Most pre-industrial economies, including India’s, were primarily agrarian. Perhaps the case can be made that India was resource-rich: fortunate with its large areas of arable land and protective surrounding geography. However, most other regions with equivalent or greater arable resources⁹ did not equal or exceed India’s result over time
- Innovation: Did India simply have an early lead? India’s economy had finessed agriculture, commerce and other fields to a sophisticated degree in ancient times. It was among the first to develop writing¹⁰, major urban centers¹¹, seats of higher learning¹² and limited liability corporations¹³. Indians exhibited mastery of philosophy and religion¹⁴; science¹⁵; economic management¹⁶;and early empire building¹⁷. Yet other approximately contemporaneous developing civilizations that were responsible for their own share of innovations¹⁸, notably those around the Fertile Crescent¹⁹ and Yellow River²⁰, did not wholly replicate India’s economic result.
- Unity: It might be unfair to judge India in totality considering it was not a united polity during some periods. However, even in these periods, India remained a successful, integrated economy. Additionally, even taking Western Europe and the Middle East together as regions, and so matching India’s regional and linguistic diversity, India’s economic performance exceeded this combined region through much of history. Might there have been periods when, say, the Roman Empire surpassed China and India? Perhaps²¹, but it did not outlast the two Asian powers.
So what distinguished India? To be sure, the answer is likely a combination of factors. But it is worth shining a particular light on India’s long history of economic policy.
Thousands of years BCE, India benefited from the administration of a carefully organized²², outward looking, trading people known as the Indus Valley Civilization (IVC). The IVC was the first to develop a marine dock²³, a precise system of weights and measurements²⁴ and a widespread planned urban culture²⁵, hallmarks of a vastly advanced commercial economy and bureaucracy. The IVC leveraged these to become the most expansive and populous of the ancient cradles of civilization²⁶.
One might theorize that these two qualities in particular — central bureaucratic organization and deep trading relations — are what reduced the internecine conflict experienced in other regions and potentially limited their economic progress. The IVC’s legacy of frequent internal trading relations and similar cultures might have provided fertile ground for political unity or at least economic integration in times of disunity.
Long after the IVC’s centralized command had faded, but still one hundred years before China’s first unification²⁹, the eastward-migrated heirs to the IVC, the Mauryans, picked up the baton of India’s economy policy. The Mauryan administration prioritized region-wide trading relations³⁰ facilitated through large-scale infrastructure improvements³¹. India’s bureaucracy was so refined under the Mauryans that it persisted for centuries³² afterward. Separately, religion³³, corporate organization³⁴ and proto-banking³⁵ flourished and helped integrate society.
These early windfalls, both in terms of policy and infrastructure, helped successive generations of Indians to ‘stand on the shoulders of giants’. So deep were the economic lines of communication, established millennia before, that even a region with large amounts of internal diversity remained united in commerce. This, for several centuries, powered the wealthiest society on the planet. Maddison and others estimate that India’s (pre-Britain) GDP per capita ranked amongst the handful of top economies throughout its history³⁶.
India’s inheritance
So, how does all of this relate to present?
- Policy inheritance: Interestingly, modern India shares many of the same qualities with its ancient counterpart. It will soon have the world’s largest population³⁷, enjoys a fair natural resource endowment³⁸,³⁹ , is regaining its technological capacity⁴⁰ and is an increasingly integrated economy⁴¹. To unleash this potential and regain its dominant economic position, India might more readily embrace policies favourable to domestic trade and economic integration (read: GST) and to long-term, supply-side economic growth (read: property and employment reform). These might best be administered by a more efficient, better-organized central authority (the roll-out of the JAM Yojana⁴² trinity is a recent example of a renewed efficiency in Indian government). This is not to acknowledge the difficulties of enacting policies in the short-term. Of course, the demonetization and GST reforms generated temporary economic frictions, as do all ground-breaking initiatives. But treat the political opportunists and naysayers with scepticism: if our ancestor civilizations taught us one thing, it is almost certainly in India’s long-term interest to persist with these reforms.
- Mind-set inheritance: Today’s archetypal Indian is likely aspirational but also cautious about economic reform. One reason for this is our recent history. The policies of the British Raj were demonstrably anti-Indian⁴³ and did unknowable damage⁴⁴. After the British left, Indians turned to welfare and self-sufficiency as an economic and mental safety net. It took 6 years of war-weariness for Europeans to embrace these ideas in 1945. Indians did so in 1947 after nearly 200 years of colonial oppression. India’s socialist policies came with independence and came to be spiritually associated with it. Many have come to believe that their ongoing freedom and livelihoods depend on retaining these policies. This provides some insight into what is holding back more Indians from enthusiastically supporting economic reform. Even recent reform, though brilliant in its impact, has been reactionary in its origin⁴⁵. Nevertheless, if India’s recent performance is any indicator, it is evident that reforms do work⁴⁶; India’s electorate seems to increasingly agree⁴⁷. Our mind-set should not just be informed by memories of the Raj. We should look further back for intellectual inspiration, and knowledge of India’s historical economic dominance is key to reasserting the nation’s collective confidence. That should be India’s true mind-set inheritance.
Guess who’s back?
It is worth finishing with a touch of indulgence.
In a positive case for India, support for policies partial to boosting domestic trade, integration and supply-side growth will emerge. This will come from Indians whose aspiration outpaces their caution. An energetic, efficient and carefully administered bureaucracy will thoughtfully implement these policies. Long-term minded Indians will ride out the short-term economic frictions and, eventually, continue the legacy of our forefathers.
To reach this positive case, policymakers and Indians alike would do well to attach context to India’s successes: to zoom out. And perhaps as the national mind-set and economic weight reverts back to its historical mean, the positive articles on India’s economy will become unchallengeable.
In an optimistic scenario for India, it will become the largest economy in the world some time in the 21st Century. Citigroup analysts expect this to happen by 205⁴⁹, Westpac (in 4 out of 5 of its scenarios) before 2100 and the CEBR between 2050 and 210⁵⁰.
Inspired yet?
Rishi Dutta is an incoming MBA student at The Wharton School (WG’20). Rishi previously worked as an Associate at J.P. Morgan, having graduated with triple first class honours from the University of Cambridge in 2013.
All opinions expressed in this article are those of the author.
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References
- One example, the OECD: https://data.oecd.org/gdp/gdp-long-term-forecast.htm
- http://www.doingbusiness.org/data/exploreeconomies/india
- https://qz.com/1316124/india-will-have-nearly-a-million-millionaires-by-2027/
- India no longer contains the world’s largest number of extremely poor people: https://www.brookings.edu/blog/future-development/2018/06/19/the-start-of-a-new-poverty-narrative/
- https://voxeu.org/article/revisiting-poverty-reduction-india-60-years-data
- See here for a more holistic picture: https://www.firstpost.com/business/25-years-of-liberalisation-a-glimpse-of-indias-growth-in-14-charts-2877654.html
- As you can expect, it is very difficult to put together a reliable basis for estimating ancient data; for the purposes of this article, I will give him the benefit of the doubt. If you are interested in the next level of methodological complexity, see here. One point of note is that Maddison assumes subsistence per capita income for all pre-industrial economies but other researchers contend that India exceeded this subsistence level at several points in its history. See here for further details: https://en.wikipedia.org/wiki/List_of_regions_by_past_GDP_(PPP)_per_capita#Indian_subcontinent
- Data table in Maddison A (2007), Contours of the World Economy I-2030AD, Oxford University Press, ISBN 978–0199227204. Available at:
- https://en.wikipedia.org/wiki/Economy_of_India_under_the_British_Raj#/media/File:1_AD_to_2003_AD_Historical_Trends_in_global_distribution_of_GDP_China_India_Western_Europe_USA_Middle_East.png
- https://en.wikipedia.org/wiki/Arable_land
- Page 58. Hart-Davis, Adam, ed. (2012). History: The Definitive Visual Guide. New York: DK Publishing. ISBN 978–0–7566–7609–4
- Feuerstein, Georg; Subhash Kak; David Frawley (1995). In search of the cradle of civilization: new light on ancient India. Wheaton, Illinois: Quest Books. p. 147. ISBN 978–0–8356–0720–9. See also: Jennings, J. (2016). Killing Civilization: A Reassessment of Early Urbanism and Its Consequences. University of New Mexico Press. p. 172. ISBN 978–0–8263–5661–1.
- “History of Education”, Encyclopædia Britannica, 2007.
- Vikramaditya S. Khanna (2005). The Economic History of the Corporate Form in Ancient India. University of Michigan
- https://en.wikipedia.org/wiki/Religion_in_India#History
- https://en.wikipedia.org/wiki/History_of_science_and_technology_in_the_Indian_subcontinent
- https://en.wikipedia.org/wiki/Economic_history_of_India#GDP_estimates
- Mauryans and Cholas. See: https://en.wikipedia.org/wiki/Maurya_Empire and https://en.wikipedia.org/wiki/Chola_dynasty
- This makes for interesting reading: https://en.wikipedia.org/wiki/Timeline_of_historic_inventions
- Charles Keith Maisels (1993). The Near East: Archaeology in the “Cradle of Civilization. Routledge. ISBN 0–415–04742–0.
- Cradles of Civilization-China: Ancient Culture, Modern Land, Robert E. Murowchick, gen. ed. Norman: University of Oklahoma Press, 1994
- It is worth noting Pliny’s complaint about the gross outflows of gold from Rome to India, China and the Middle East: India, China and the Arabian peninsula take one hundred million sesterces from our empire per annum at a conservative estimate: that is what our luxuries and women cost us. For what fraction of these imports is intended for sacrifices to the gods or the spirits of the dead? (Pliny, Historia Naturae 12.41.84)
- Wright, R. P. 2010. The Ancient Indus: Urbanism, Economy and Society. New York: Cambridge University Press
- S. R. Rao (1985). Lothal. Archaeological Survey of India. pp. 28–29
- Feuerstein, Kak and Frawley (1995)
- Wright (2010)
- Feuerstein, Georg; Subhash Kak; David Frawley (1995). In search of the cradle of civilization: new light on ancient India. Wheaton, Illinois: Quest Books. p. 147. ISBN 978–0–8356–0720–9
- Image available at: http://swapsushias.blogspot.com/2013/02/indus-valley-civilizationfully-unearthed.html#.W04bOi-ZOWY
- http://www.ancientpages.com/2015/06/10/lothal-city-of-dead-one-of-the-most-prominent-ancient-places-in-danger-to-be-forgotten/
https://en.wikipedia.org/wiki/History_of_China - Doniger, Wendy (30 September 2010). The Hindus: an alternative history. Oxford University Press. p. 67. ISBN 978–0–19–959334–7.
- Claessen, Henri, J.M. and Peter Skalnik (1978). “The Early State”. New Babylon. Mouton Publishers. P. 397
- https://www.tandfonline.com/doi/abs/10.1080/01900699808525298?journalCode=lpad20
- Mahaprajna, Acharya (2001). Anekant: Views And Issues (First ed.). Ladnun, India: Jain Vishwa Bharati University, Ladnun, India. p. 46.
- Khanna, Vikramaditya S. (2005). “The Economic History of the Corporate Form in Ancient India”. University of Michigan
- https://en.wikipedia.org/wiki/Banking_in_India#History
- See in particular: Vivek Suneja (2000). Understanding Business: A Multidimensional Approach to the Market Economy. Psychology Press. p. 13.; Parthasarathi, Prasannan (2011), Why Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600–1850, Cambridge University Press, pp. 38–45, ISBN 978–1–139–49889–0; Jeffrey G. Williamson, David Clingingsmith (August 2005). “India’s Deindustrialization in the 18th and 19th Centuries” (PDF). Harvard University. Retrieved 2017–05–18
- https://www.telegraph.co.uk/news/worldnews/asia/india/11770757/Mapped-India-predicted-to-become-worlds-most-populous-country-by-2022.html
- https://www.investopedia.com/articles/markets-economy/090516/10-countries-most-natural-resources.asp
- https://en.wikipedia.org/wiki/Natural_resources_of_India
- https://economictimes.indiatimes.com/news/economy/indicators/india-60th-most-innovative-globally-china-at-22nd-report/articleshow/59160953.cms
- https://www.jagranjosh.com/current-affairs/union-government-celebrates-first-goods-and-services-tax-day-1530510670-1
- https://en.wikipedia.org/wiki/JAM_Yojana
- “Of Oxford, economics, empire, and freedom”. The Hindu. Chennai. 2 October 2005. Retrieved 6 December 2010.
- https://en.wikipedia.org/wiki/Economy_of_India_under_the_British_Raj
https://www.nytimes.com/1991/06/29/world/economic-crisis-forcing-once-self-reliant-india-to-seek-aid.html - To be sure, this poses one associated danger of unchecked economic growth: inequality. Inclusive economic growth has been shown to improve an economy’s quality.
- https://www.livemint.com/Opinion/WmpSjQAvPGeVzxqpgXYvtK/The-dangers-of-Indias-Billionaire-Raj.html
- To be sure this poses one associated danger of unchecked economic growth: inequality. Inclusive economic growth has been shown to improve an economy’s quality. https://www.livemint.com/Politics/dzihMkvboJ091DnLQAzI3H/UP-election-victory-may-put-Modi-govts-reform-agenda-back-o.html
- https://www.quora.com/Many-population-analysts-predict-India-will-overtake-China-in-4-to-3-decades-your-thoughts
- http://www.citibank.com/transactionservices/home/sa/2011q1/cab/docs/presentations/day2_3_Economic_outlook.pdf
- https://www.bloomberg.com/news/articles/2017-12-26/china-to-overtake-u-s-economy-by-2032-as-asian-might-builds
