The Structure and Organization of the Indian Economy Before Colonial Rule

STRUCTURE OF THE
INDIAN ECONOMY
BEFORE THE
COLONIAL PERIOD
DR. KARISHMA CHAUDHARY

“To know your future you must know your past”
― George Santayana

Economic History
Analysing long-term economic, social and political change
Focus on the processes of change, rather than historical events
Using an understanding of history to explain the present and DIRECTION FOR FUTURE

INDIAN ECONOMY – A
BRIEF HISTORY

TH E INDUS VALLEY CIVILIZATION

The economic history of India begins with the Indus Valley Civilization (3300–1300 BCE),
whose economy appears to have depended significantly on trade and examples of
overseas trade.
The Vedic period saw countable units of precious metal being used for exchange. The
term Nishka appears in this sense in the Rigveda.
Historically, India was the largest economy in the
world for most of the next three millennia, starting around the 1st millennia BCE and
ending around the beginning of British Raj.

Around 600 BCE, the Mahajanapadas minted punch-marked silver coins. The period was
marked by intensive trade activity and urban development.
By 300 BCE, the Maurya Empire had united most of the Indian subcontinent. The resulting
political unity and military security allowed for a common economic system and enhanced
trade and commerce, with increased agricultural productivity.
The Maurya Empire was followed by classical and early medieval kingdoms, including
the Cholas, Guptas, Western Gangas, Harsha, Palas, Rashtrakutas and Hoysalas.
During this period, Between 1 CE and 1000 CE, the Indian subcontinent is estimated to
have accounted for one-third, to one-fourth of the world's population, and product,
though GDP per capita was stagnant.
According to the Balance of Economic Power, India had the largest economy for most of the
interval between the 1st century and 18th century, the most of any region for a large part of
the last two millennia.
Up until 1000 CE, India had a large share of the world population, but its GDP per capita was
not much higher than subsistence level.

India experienced per-capita GDP growth in the high medieval era after 1000 CE, during
the Delhi Sultanate in the north and Vijayanagara Empire in the south, but was not as productive
as Ming China until the 16th century.
By the late 17th century, most of the Indian subcontinent had been under the Mughal Empire,
which became the largest economy and manufacturing power in the world, producing about a
quarter of global GDP, before being conquered over the next century.
During the medieval times, India was the world leader in manufacturing, producing 25%
of the world's industrial output up until the mid-18th century, prior to British rule.
Bengal Subah, the empire's wealthiest province, that solely accounted for 40% of Dutch
imports outside the west, was a world leader in the productive agriculture, textile
manufacturing and shipbuilding, and as its result, the proto-industrialization was emerged.

By 18th century, Mysoreans embarked on an ambitious economic development program that
established the Kingdom of Mysore as a major economic power, with some of the world's
highest real wages and living standards in the late 18th century.
During this period, Mysore overtook the wealthy Bengal Subah as India's dominant economic
power, with highly productive agriculture and textile manufacturing.
Mysore's average income was five times higher than subsistence level at the time.
The Maratha Empire also managed an effective administration and tax collection policy
throughout the core areas under their control and extracted chauth from vassal states.
India experienced deindustrialisation and 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 24.4% in 1700 to
4.2% in 1950, and its share of global industrial output declining from 25% in 1750 to 2%
in 1900.
Due to 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

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 launched economic liberalisation,
allowing it to emerge as one of the world's fastest growing large economies.

Indus Valley Civilization
Indus Valley Civilization, the first known permanent and predominantly urban settlement,
flourished between 3500 BCE and 1800 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, layouts, drainage system 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 economy was 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

Religion
Religion played an influential role in shaping economic activities.
Pilgrimage towns like Prayagraj, Banaras, Nasik and Puri, mostly centred around rivers,
developed into centres of trade and commerce.
Religious functions, festivals and the practice of taking a pilgrimage resulted in an early
version of the hospitality industry.
Economics in Jainism is influenced by Mahavira and his philosophy. He was the last of the
24 Tirthankars, who spread Jainism. Relating to economics he explained the importance of
the concept of 'anekanta' (non-absolutism).

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 persons would be supported by their families.
The system prevented agricultural land from splitting with each generation, aiding yield from
the benefits of scale. Such sanctions curbed the spirit of rivality in junior members and instilled
a sense of obedience.

Organizational 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, nigama
and Shreni. Nigama, 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 BCE until around the 10th century CE. 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 BCE onwards.
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

Practice of agriculture
Domestication of animals
Focus on Maritime trade
Use of Weapons

Coinage
Punch marked silver ingots were in circulation around the 5th century BCE.
They were the first metallic coins minted around the 6th century BCE by
the Mahajanapadas of the Gangetic plains and were India's earliest traces of coinage.
While India's many kingdoms and rulers issued coins, barter was still widely prevalent.
Villages paid a portion of their crops as revenue while its craftsmen received a stipend out of
the crops for their services. Each village was mostly self-sufficient.

Maurya Empire, c. 250 BCE.
During the Maurya Empire (c. 321–185 BCE), 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.
The empire spent considerable resources building and maintaining roads. The improved
infrastructure, combined with increased security, greater uniformity in measurements, and
increasing usage of coins as currency, enhanced trade

West Coast
Maritime trade was carried out extensively between South India and Southeast and West
Asia from early times until around the fourteenth century AD.
Both the Malabar and Coromandel Coasts were the sites of important trading centres from as
early as the first 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 thirteenth 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.

Silk Route
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.

Although many kingdoms and rulers issued coins, barter was prevalent. 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

Delhi Sultanate
Before and during the Delhi Sultanate (1206–1526 CE), 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, peoples,
technologies and ideas.
While initially disruptive, the Delhi Sultanate was responsible for integrating the Indian
subcontinent into a growing world system.

The period coincided with a greater use of mechanical technology in the Indian subcontinent.
From the 13th century onwards, India began widely adopting mechanical technologies from
the Islamic world, including water-raising wheels with gears and pulleys, machines
with cams and cranks, papermaking technology,and the spinning wheel.

The worm gear roller cotton gin was invented in the Indian subcontinent during the 13th–
14th centuries, and is still used in India through to the present day.
The incorporation of the crank handle in the cotton gin first appeared in the Indian
subcontinent some time during the late Delhi Sultanate or the early Mughal Empire.
The production of cotton, which may have largely been spun in the villages and then taken to
towns in the form of yarn to be woven into cloth textiles, was advanced by the diffusion of the
spinning wheel across India during the Delhi Sultanate era, lowering the costs of yarn and
helping to increase demand for cotton. The diffusion of the spinning wheel, and the
incorporation of the worm gear and crank handle into the roller cotton gin, led to
greatly expanded Indian cotton textile production.
India's GDP per capita was lower than the Middle East from 1 CE (16% lower) to 1000 CE
(about 40% lower), but by the late Delhi Sultanate era in 1500, India's GDP per capita
approached that of the Middle East.

GDP
According to economic historian Angus Maddison in Contours of the world economy, 1–2030
AD: essays in macro-economic history, the Indian subcontinent was the world's most
productive region, from 1 CE to 1600

Year % of world GDP Population
% of world
population
Period
1 32.0 70,000,000 30.3 Classical era
1000 28.0 72,500,000 27.15 Early medieval era
1500 24.35 79,000,000 18.0 Late medieval era
1600
22.39 100,000,000 17.98
Early Modern Era
1700
24.43 27.36
1820
16.04 20.06

Medieval India
Economy of India under Mughal Empire, Maratha Empire and among others was prosperous
into the early 18th century.
It is estimated that 28,000 tonnes of bullion (mainly from the New World) flowed into the
Indian subcontinent between 1600 and 1800, equating to 20% of the world's production in the
period.
An estimate of the annual income of Emperor Akbar's treasury, in 1600, is £17.5 million (in
contrast to the tax take of Great Britain two hundred years later, in 1800, totaled £16 million).
The South Asia region, in 1600, was estimated to be the second largest in the world, behind
China's.
.

TH E MUGHAL PERIOD
(1526-1858 AD)

India experienced unprecedented
prosperity during the Mughal period.
GDP was estimated to be about 25.1%of
the World economy
In 1600AD the annual revenue to Akbar’s
treasury = £17.5 million
(in contrast to the entire treasury of Great
Britain two hundred years later in 1800 AD,
which totaled £16 million).

Prof. Angus Maddisson says...
India's share of world GDP was slightly more
than a quarter in the year 1000 AD, and
slightly less than a quarter between 1500 AD
and 1700 AD.

Historian Shireen Moosvi estimates that the secondary sector contributed a higher
percentage to the Mughal economy (18.2%) than it did to the economy of early 20th-
century British India (11.2%).
By the late 17th century, the Mughal Empire was at its peak and had expanded to
include almost 90 percent of the Indian subcontinent. It enforced a uniform customs
and tax-administration system.
In 1700, the exchequer of the Emperor Aurangzeb reported an annual revenue of
more than £100 million, or $450 million, more than ten times that of his
contemporary Louis XIV of France, while controlling just 7 times the population.

By 1700, Mughal India had become the world's largest economy, ahead of Qing
China and Western Europe, containing approximately 24.2% of the World's population, and
producing about a quarter of world output.
Mughal India produced about 25% of global industrial output into the early 18th century.
India's GDP growth increased under the Mughal Empire, exceeding growth in the prior 1,500
years.
The Mughals were responsible for building an extensive road system, creating a
uniform currency.
The Mughals adopted and standardized the rupee currency introduced by Sur Emperor Sher
Shah Suri.
The Mughals minted tens of millions of coins, with purity of at least 96%,
without debasement until the 1720s.

The empire met global demand for Indian agricultural and industrial products.
Cities and towns boomed under the Mughal Empire, which had a relatively high degree
of urbanization (15% of its population lived in urban centres), more urban than Europe at the
time and British India in the 19th century.
Multiple cities had a population between a quarter-million and half-million people, while some
including Agra (in Agra Subah) hosted up to 800,000 people and Dhaka (in Bengal Subah)
with over 1 million.
64% of the workforce were in the primary sector (including agriculture), while 36% were in
the secondary and tertiary sectors.
The workforce had a higher percentage in non-primary sectors than Europe at the time; in
1700, 65–90% of Europe's workforce were in agriculture, and in 1750, 65–75% were in
agriculture

Agriculture
Indian agricultural production increased.
Food crops included wheat, rice, and barley, while non-food cash
crops included cotton, indigo and opium.
By the mid-17th century, Indian cultivators had begun to extensively grow two crops from
the Americas, maize and tobacco.
Bengali peasants learned techniques of mulberry cultivation and sericulture,
establishing Bengal Subah as a major silk-producing region.
Agriculture was advanced compared to Europe, exemplified by the earlier common use of
the seed drill.
The Mughal administration emphasized agrarian reform, which began under the non-Mughal
Emperor Sher Shah Suri. Akbar adopted this and added more reforms.
The Mughal government funded the building of irrigation systems, which produced much
higher crop yields and harvests.

One reform introduced by Akbar was a new land revenue system called zabt. He replaced
the tribute system with a monetary tax system based on a uniform currency.
The revenue system was biased in favour of higher value cash crops such as cotton,
indigo, sugar cane, tree-crops, and opium, providing state incentives to grow cash crops,
adding to rising market demand.
Under the zabt system, the Mughals conducted extensive cadastral surveying to assess the
cultivated area.
The Mughal state encouraged greater land cultivation by offering tax-free periods to those
who brought new land under cultivation.
According to evidence cited by economic historians Immanuel Wallerstein, Irfan
Habib, Percival Spear, and Ashok Desai, per-capita agricultural output and standards of
consumption in 17th-century Mughal India was higher than in 17th-century Europe and early
20th-century British India.

Manufacturing
Until the 18th century, Mughal India was the most important manufacturing center for international
trade.
Key industries included textiles, shipbuilding and steel. Processed products included cotton
textiles, yarns, thread, silk, jute products, metalware, and foods such as sugar, oils and butter.
This growth of manufacturing has been referred to as a form of proto-industrialization, similar to
18th-century Western Europe prior to the Industrial Revolution.
Early modern Europe imported products from Mughal India, particularly cotton textiles, spices,
peppers, indigo, silks etc.
European fashion, for example, became increasingly dependent on Indian textiles and silks. From
the late 17th century to the early 18th century, Mughal India accounted for 95% of British
imports from Asia, and the Bengal Subah province alone accounted for 40% of Dutch imports from
Asia.

In contrast, demand for European goods in Mughal India was light.
Exports were limited to some woolens, ingots, glassware, mechanical clocks, weapons,
particularly blades for Firangi swords, and a few luxury items.
The trade imbalance caused Europeans to export large quantities of gold and silver to
Mughal India to pay for South Asian imports.
Indian goods, especially those from Bengal, were also exported in large quantities to other
Asian markets, such as Indonesia and Japan.
The largest manufacturing industry was cotton textile manufacturing, which included the
production of piece goods, calicos and muslins, available unbleached in a variety of colours.

The cotton textile industry was responsible for a large part of the empire's international trade.
The most important center of cotton production was the Bengal Subah province, particularly
around Dhaka.
Bengal alone accounted for more than 50% of textiles and around 80% of silks imported by
the Dutch.
Bengali silk and cotton textiles were exported in large quantities to Europe, Indonesia and
Japan.
Mughal India had a large shipbuilding industry, particularly in the Bengal Subah province.
Economic historian Indrajit Ray estimates shipbuilding output of Bengal during the
sixteenth and seventeenth centuries at 223,250 tons annually, compared with 23,061
tons produced in nineteen colonies in North America from 1769 to 1771

Bengal Subah
Bengal Subah was the Mughal's wealthiest province, generating 50% of the empire's GDP
and 12% of the world's GDP.
According to Ray, it was globally prominent in industries such as textile
manufacturing and shipbuilding.
Bengal's capital city Dhaka was the empire's financial capital, with a population exceeding
one million. It was an exporter of silk and cotton textiles, steel, saltpeter and agricultural and
industrial products.
Domestically, much of India depended on Bengali products such as rice, silks and cotton
textiles

Late Mughal Empire
In the early half of the 18th century, Mughal Empire fell into decline, with Delhi sacked
in Nader Shah's invasion of the Mughal Empire, the treasury emptied.
The Mughals were replaced by the Marathas as the dominant military power in much of India,
while the other smaller regional kingdoms who were mostly late Mughal tributaries, such as
the Nawabs in the north and the Nizams in the south, declared autonomy.
However, the Mughal tax administration system was left largely intact, estimating revenue
assessment actually increased to 50 percent or more, in contrast to China's 5 to 6 percent, to
cover the cost of the wars.

Maddison gives the following estimates for
the late Mughal economy's income
distribution
Late Mughal economy's income distribution (c. 1750
Social group % of population % of total income
Nobility, Zamindars 1 15
Merchants to
Sweepers
17 37
Village Economy 72 45
Tribal Economy 10 3
Total 100 100

CHARACTERISTICS OF THE PRE-
COLONIAL ECONOMY

Main features...
Self-sufficient
Agriculture
Flourishing
Trade
Rich Handicraft
Industries

1. Agriculture
1) Subistence farming
2) Villages = self sufficient
economic units
3) Outside contact were limited to
the payment of land revenue &
purchase of necessities
4) Storage of the surplus
(remedy against famines)

2. Trade
1) India enjoyed extensive trade both
within and outside the country.
2) Balance of Trade, means excess of
exports over imports
3) Main imports –
Pearls,Wool,Dates,Gold,Drugs,Tea,C
opperIron, Lead,Paper
4) Main exports –
RawSilk,Indigo,Opium,Rice,Wheat,Su
gar, Cotton Textiles,Pepper,Precious
Stones

3. Handicrafts & Industries
1) INDIA-Land of extensive manufactures
2) Indian artisans were famous for their skills the world over
3) Reason for India’s favourable foreign trade was its excellence
in indigenous production.
4) Industries received patronage of local administrators for their
gradual development.

a) Handicrafts
1) India indulged in large scale manufacture of cotton
,jute and silk fabrics.
2) Towns like Dacca and Murshidabad in Bengal; Patna
in Bihar; Surat and Ahmedabad in Gujarat; Chanderi
in Madhya Pradesh; Burhanpur
in Maharashtra;Jaunpur, Varanasi, Lucknow and
Agra in U.P.; Multan and Lahore in the Punjab;
Masulipatnam, Aurangabad and Visakhapatnam in
Andhra; Bangalore ,Mysore Coimbatore and Madurai
in Madras were flourishing centers of textile industry.
Kashmir specialized in woolen manufactures.
Mummies in Egyptian tombs, dating 2000BC, have been found wrapped in Indian muslin of finestquality.

Contd...
Moreover, India was well known for her other artistic handicraft
industries which include jewellery made of gold and silver, brass,
copper and bell metal wares, marble work, carving works in ivory,
wood, stone etc.
Artistic glassware was also produced in India during those days and
had earned international reputation during those days.

b) Industries
Maharashtra, Andhra and Bengal were
prominent centers of ship building industry.
India's ships were bought by manyEuropean
companies for their use.
India had large scale manufacture of dyestuffs,
mineral and metallic products like arms, metal
wares & oil.
India had also developed high level of
metallurgy by those days and the cast-ironpillar
standing near Delhi is a real testament ofthat.

Contd...
All these industries and handicrafts had its patronage of local administrators for their
gradual development. In the urban area each handicraft was properly organized into a
guild so as to safeguard their common interest. These guilds were enacting their own
laws which were again respected by the then rulers of the country.
According to M.G. Ranade, the Indian industries “not only supplied all local wants but also
enabled India to export its finished products to foreign countries.” During those days, Indian
export items were consisting mostly of manufactured items like cotton and silk fabrics,
calicos, silk and woolen cloth and artistic wares made of glass and metal.
Besides, the other export items were cinnamon, pepper, opium, indigo etc. Throughout the
17th and 18th century, European countries were purchasing the above mentioned
manufactures of India.

4. Banking
Banking system was quite developed.
Individuals & families functioned as banks.
Known in different names – Jagat Seth, Nagar Seth,Mahajan, Shroffetc.
Big banking houses – functioned as receiver and treasurer of govt revenue
Banking houses financed for domestic buisness & international trade.
Source of capital- Interest from loans provided to handicraftsmen tradersetc

Condition of the villages and village communities...
The village community was composed of different groups based on simple division of
labour. There were farmers who cultivated land and tended cattle. Other groups of
people were weavers, goldsmith, potters, washer men, carpenters, cobblers, oil
pressers, barber-surgeons etc.
Occupations were hereditary.
Remuneration in terms of crops during the harvesting period against the services
rendered by them.

Contd...
These Indian villages were functioning independently as most of food articles and raw
materials produced within the villages were either consumed or purchased by the village
communities itself. Agricultural and handicraft industry were interdependent and thus the
village republics were able to function independently.
Indian villages were almost self-sufficient in respect of daily necessities

Contd...
In this connection, Sir Charles Metacalfe wrote, “The village communities are little
republics having nearly everything they want within themselves, and almost independent
of foreign relations. They seem to last where nothing lasts. This union of the village
communities each one forming a separate little state by itself…………………… is in a
high degree conducive to their happiness, and to the enjoyment of a great portion of
freedom and independence”.

Contd...
Thus during the pre-British period, Indian villages were mostly consisting of three
distinct classes:
✣(a) the agriculturists,
✣b) the village artisans and
✣(c) the village officials.
There were again two types of agriculturists— the land owning and the tenants.
The village community had enjoyed a simple form of self government. The headman, the
watchman, the accountant, the preacher, the school teacher etc. were all village officers.
Thus Indian villages during those days were working as a complete administrative and
economic unit.

The Structure and the Conditions of Towns…
The major portion of the total population of India was living in the rural areas.
Nearly 10 per cent of the total population was living in the urban areas and those towns
were merely out grown villages.

Contd...
According to Prof. D.R. Gadgil, towns of those days owed their existence principally
due to the following three reasons:
(a) A good number of towns of India were places of pilgrimage or sacred religious centers (for
example, Gaya, Benaras, Allahabad, Puri, Nasik etc.);
(b)A good number of towns were the seats of courts of Nawabs or kings or the capital of a
province (for example, Bijapur, Golconda, Delhi, Lahore, Lucknow, Poona etc.); and
(c)A good number of towns were trading or commercial centers due to its trade importance
(for example, Surat, Mirzapur, Hubli, Bangalore etc.). These towns were existing on different
trade routes. Those towns which were actually the trade centers proved more stable.

Conditions of Transport and Trade
During that period, there were no proper transportation systems in India. In the absence
of pucca roads, different villages of India were connected with dusty tracks. Naturally,
most of the roads become muddy during the rainy season and even some of the villages
were cut-off due to heavy rainfall followed by consequent flood.
water transport - only in some parts of Northern India
(small wooden country boats were used )
Bullock carts and pack animals were considered as the standard modes of transport.
Hence the movement of men and materials was very slow.

Contd...
During those days weekly markets were organized in different parts of the country and
most of the people used to make their daily purchases from these weekly markets. In
some places annual fairs were organized in addition to these weekly markets.
Thus, in fine, we can conclude that the transport system as well as the market conditions
in India during that period was not at all satisfactory.

Post Mughals
Among the post-Mughal states that emerged in the 18th century, the dominant economic powers
were Bengal Subah (under the Nawabs of Bengal) and the South Indian Kingdom of
Mysore (under Hyder Ali and Tipu Sultan).
The former was devastated by the Maratha invasions of Bengal,which experienced six invasions,
over a decade, claimed to have killed hundreds of thousands, blocked trade with the Persian and
Ottoman empires, and weakened the territory's economy to the point the Nawab of Bengal agreed to
a peace treaty with the Marathas.
The agreement made Bengal Subah a tributary to the Marathas, agreeing to pay Rs. 1.2 million in
tribute annually, as the Chauth of Bengal and Bihar. The Nawab of Bengal also paid Rs. 3.2 million
to the Marathas, towards the arrears of chauth for the preceding years. The chauth was paid
annually by the Nawab of Bengal, up to his defeat at the Battle of Plassey by the East India
Company in 1757.
Sivramkrishna states that the economy of the Kingdom of Mysore then overtook that of Bengal, with
real income five times higher than subsistence level, i.e. five times higher than $400
(1990 international dollars), or $2,000 per capita. In comparison, Maddison estimates the 1820 GDP
per-capita (PPP 1990 $) of the Netherlands at $1,838, and $1,706 for Britain

Jeffrey G. Williamson argued that India went through a period of deindustrialization in the
latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire,
and that British rule later caused further deindustrialization.
According to Williamson, the Mughal Empire's decline reduced agricultural productivity, which
drove up food prices, then nominal wages, and then textile prices, which cost India textile
market share to Britain even before the latter developed factory technology, though Indian
textiles maintained a competitive advantage over British textiles until the 19th century.
Prasannan Parthasarathi countered that several post-Mughal states did not decline, notably
Bengal and Mysore, which were comparable to Britain into the late 18th century.

BRITISH RULE
The British East India Company conquered Bengal Subah at the Battle of Plassey in 1757.
After gaining the right to collect revenue in Bengal in 1765, the East India Company largely
ceased importing gold and silver, which it had hitherto used to pay for goods shipped back to
Britain.

In addition, as under Mughal rule, land revenue collected in the Bengal Presidency helped finance the
Company's wars in other parts of India. Consequently, in the period 1760–1800, Bengal's money
supply was greatly diminished. The closing of some local mints and close supervision of the rest, the fixing
of exchange rates and the standardization of coinage added to the economic downturn.[97]
During the period 1780–1860 India changed from an exporter of processed goods paid for in bullion to an
exporter of raw materials and a buyer of manufactured goods.[97] In the 1750s fine cotton and silk was
exported from India to markets in Europe, Asia, and Africa, while by the second quarter of the 19th century,
raw materials, which chiefly consisted of raw cotton, opium, and indigo, accounted for most of India's
exports.[98] From the late 18th century the British cotton mill industry began to lobby their government to tax
Indian imports and allow them access to markets in India.[98] Starting in the 1830s, British textiles began to
appear in—and then inundate—Indian markets, with the value of the textile imports growing from £5.2
million in 1850 to £18.4 million in 1896.[99] The abolition of slavery encouraged Caribbean plantations to
organize the import of South Asian labor.

The British rule
The British East India Company, whose political power gradually expanded in India from
1757 onwards, used huge revenue generated by the provinces under its rule for
purchasing Indian raw materials, spices and goods. Thus the continuous inflow of bullion
that used to come into India on account of foreign trade stopped altogether.
In short span of 80 years (1780-1860 AD) under Colonial rule, India changed from being
an exporter of processed goods for which it received payment in bullion, to being an
exporter of raw materials and a buyer of manufactured goods.

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Contd...
The ruthless exploitation under British colonial rule completely devastated India’s
economy. India’s population was subject to frequent famines, had one of the world's
lowest life expectancies, suffered from pervasive malnutrition and was largely illiterate.
As per British economist, Angus Maddison India's share of the world income went from
27% in 1700 AD (compared to Europe's share of 23%) to 3% in 1950.

The Structure and Organization of the Indian Economy Before Colonial Rule

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The Structure and Organization of the Indian Economy Before Colonial Rule