The Indus Valley Civilisation, the early civilisation of India and Pakistan, developed an economy based on agriculture and craft that later spread into central India. Angus Maddison estimates that from 1-1000 AD, the regions making up present-day India contributed roughly 30% of the world's population and GDP. India experienced per-capita GDP growth in the high medieval era.
By the late 17th century, the Mughal Emperor Aurangzeb had united most of the Indian subcontinent, whose realm, Maddison estimates, produced about a quarter of global GDP.
Until the 18th century, India was one of the most important manufacturing centres in international trade. This manufacturing growth is often seen as a form of proto-industrialisation, similar to 18th-century Western Europe before the Industrial Revolution. According to Jeffrey Williamson, the Indian subcontinent deindustrialised in the latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire, and British rule later caused further deindustrialisation.
India experienced deindustrialisation and the cessation of various craft industries under British rule, which, along with fast economic and population growth in the Western world, resulted in India's share of the world economy declining from 23% in 1700 to 4.2% in 1950, and its share of global industrial output declining from 23% in 1750 to 2% in 1900. Because of 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.
From 1850 to 1947, India's GDP in 1990 international dollar terms grew from $125.7 billion to $213.7 billion, a 70% increase, or an average annual growth rate of 0.55%. In 1820, India's GDP was 16% of the global GDP. By 1870, it had fallen to 12%, and by 1947 to 4%. Broadberry, Custodis and Gupta estimate that Indian GDP per capita fell from over 60% of the British level to less than 15% by 1871. The Republic of India, founded in 1947, adopted central planning for most of its independent history, with extensive public ownership, regulation, red tape and trade barriers. After the 1991 economic crisis, the central government began a policy of economic liberalisation. GDP growth averaged about 3.6% a year in 1951-1974, rising to about 5.7% in 1981-1991, and 5.9% in 1992-2003. The World Bank estimates that extreme poverty, at $3 a day, fell from 27.1% in 2011-12 to 5.3% in 2022-23.
Indus Valley Civilization
The Indus Valley civilisation, one of the world's first known permanent and predominantly urban settlements, flourished between 3300 BCE and 1300 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. 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.
Ancient and medieval characteristics
Although ancient India had a significant urban population, much of India's population resided in villages, whose economies were largely isolated and self-sustaining. 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.
Family business
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.
Organisational entities
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, and Shreni. , 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.
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.Jataka IV. 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.
Coinage
Punch marked silver ingots were in circulation in the 6th-5th century BC. 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.
Maurya Empire
During the Maurya Empire (c. 321–185 BC), important changes and developments affected the Indian economy. It was the first time most of India was unified under one ruler. With an empire in place, trade routes became more secure.
Agriculture constituted the backbone of the Mauryan economy, with the state actively promoting land reclamation, settlement of cultivators, and the construction and maintenance of irrigation works such as canals and reservoirs, particularly in the Gangetic plains.
The Mauryan state exercised extensive control over trade, industry, and commerce, as described in the Arthashastra of Kautilya, which lays down detailed regulations regarding markets, prices, weights and measures, taxation, and state policies. The empire spent considerable resources building and maintaining roads.
The improved infrastructure, combined with increased security, greater uniformity in measurements, and increasing usage of punch-marked silver coins as the principal medium of exchange, reflecting a monetized economy with wide circulation of currency.
During this time India's share is estimated to have been from 32% to 35% of the world economy.Ratan Lal Basu & Rajkumar Sen, Ancient Indian Economic Thought, Relevance for Today , Rawat Publications, New Delhi, 2008.
Gupta Empire
The period between the 4th and 6th centuries CE witnessed significant economic prosperity and marked by significant growth in trade, craft production, and monetization, leading many historians to describe the period as a Golden Age of India. Agriculture formed the backbone of the economy, supported by the widespread use of iron tools, expansion of cultivated land, and irrigation works such as wells, tanks, and canals.
Land revenue, and agricultural produce was the principal source of state income, though additional taxes and forced supplies were also levied.
Trade and commerce flourished during this period, with well-developed internal trade networks and extensive foreign trade with several civilisations such as the Roman Empire, Southeast Asia, China, and Central Asia, through both land and maritime routes.
Gupta administration proved to be highly conducive for the rapid growth of urban centres. The principal and original capital of the Gupta Empire is regarded to be Pataliputra.
The gross domestic product (GDP) of ancient India was estimated to be 32% and 28% of global GDP in 1 AD and 1000 AD, respectively. Also, during the first millennium of the Common Era, the Indian population comprised approximately 27.15%–30.3% of the total world population.Building Bridges Among the BRICs, p. 125, Robert Crane, Springer, 2014Raghu Vamsa v 4.60–75
Medieval India
The number of coins in circulation declined and instead credit arrangements predominated. Contemporary Hindu law devote increasing attention to sureties, collateral, promissory notes and compound interest.
Villages paid a portion of their agricultural produce as revenue to the rulers, while their craftsmen received a part of the crops at harvest time for their services.
Trade
Maritime trade was carried out extensively between South India and Southeast and West Asia from early times until around the 14th century AD. 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. 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.
Other scholars suggest trading from India to West Asia and Eastern Europe was active between the 14th and 18th centuries. 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.
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.
Delhi Sultanate Before and during the Delhi Sultanate (1206–1526 AD), Islam underlay a cosmopolitan civilization. It offered wide-ranging international networks, including social and economic networks. They spanned large parts of Afro-Eurasia, leading to escalating circulation of goods, people, technologies and ideas. While initially disruptive, the Delhi Sultanate was responsible for integrating the Indian subcontinent into a growing world system.