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Plotting the contours for India’s
economic development: Why this
could be a role model for other
developing nations as well
Sujay Rao Mandavilli
Published in Google books, May 2024

Introduction

In a paper published by us a couple of years ago on Anthropological Economics, (the year 2020 to be
precise) we had mooted the idea of trickle up economics as contrasted with the rather more popular
and mundane trickle down economics. We had argued that the latter would be somewhat dubious, iffy,
inconsistent and non-replicable in a wide variety of situations, particularly in the case of developing
nations. We had argued that trickle up economics would actually boost wide-ranging economic growth,
and add to the Gross domestic product in a big way. While we never were, and still are not big fans of
socialism, we have always argued, and will continue to argue for balanced, diversified and equitable
economic development models. There is a world of difference between the two. We had also argued
that the economic models pursued by advanced industrial nations will not by and large, work in
developing nations. Thus, American style economic conservatism is meaningless in Indian political and
economic contexts. There are fundamental differences in ground realities between these two different
sets of nations. It would make eminent sense for the readers of this book to read the aforesaid paper as
well, as we will not be able to reproduce the contents in this paper in its entirely here; many of the
proposals advocated and espoused in this paper can also be implemented by developing economies,
though rather much more slowly. We focus only on the meat here.
We had also argued for aligning economic development models with culture in the interests of faster
and more rapid economic growth. India was, is, and will perhaps remain an agrarian economy for a long
time to come, and the basic and the fundamental nature of the Indian economy may not change
radically immediately. In the aforesaid paper, we had also introduced the concept of cultural alienation;
this process however would we argued take place somewhat slowly; hundreds of millions of people
cannot move away from agriculture in a jiffy. Economic growth theory has some implications for science.
This is because the apposite economic development models alone can pull millions of people out of
poverty and allow them to pursue other pursuits in tandem, such as more creative pursuits. Therefore,
the right kind of economic development models will help India reach its all its other ambitions such as its
science and technology ambitions and aspirations faster. This concept is akin to, though somewhat
different from, the grassroots popularization of science, and Abraham Maslow’s hierarchy of needs
which were further expanded by the ERG theory proposed by Clayton Alderfer and Manfred Max-Neef’s
theory of fundamental human needs, among others. We also have the functional prerequisites theory
developed by Talcott Parsons and others. Thus, as per this theory, basic human prerequisites such as
food, shelter, clothing and money need to be satisfied first. Like many other theories in academic, these
theories are not supported by empirical evidence, and remain contested. The broad contours and
direction of this theory is however, probably wholly and entirely correct. 1
It would also be necessary to introduce the growth versus development debate here in a nutshell.
Economic growth in normally defined as the increase in inflation-adjusted market value of the goods
and services produced in a country in a period in time. It is commonly measured as the rate of increase
in Gross Domestic Product or GDP. An increase in economic growth may be caused by more efficient use
of inputs (This is known as intensive growth) or increase in the amount of inputs (This is known as
1 Sujay Rao Mandavilli (2020) Introducing Anthropological Economics: The quest for an Anthropological basis for Economic theory, growth
models and policy development for wealth and human welfare maximization ELK Asia Pacific Journal of Social Sciences 2020: June

extensive growth). Economic development on the other hand, is a process by which the economic well-
being of large sections of populations is improved in accordance with an economic plan, economic
policies and goals. Economic growth may be skewed, and may not necessarily lead to comprehensive
economic development. Therefore, economic growth is only one aspect of economic development.
Economic development is measured through more complex and comprehensive indicators which may
vary from context to context. Sociologists have differed with most economists, and preferred to equate
economic development with wider well-being of populations and social and cultural change. According
to Manley, “Economic development is a process by which an economy is transformed from one that is
dominantly rural and agricultural to one that is dominantly urban, industrial, and service in
composition." [Manley 1987].Thus, GDP growth need not always be accompanied by the creation of jobs
(This is sometimes referred to as jobless growth), or wide-ranging wealth creation. Other related
concepts are underemployment and disguised unemployment. Most sociologists have also distinguished
between modernization and westernization. This has gained traction due to the emergence of tiger
economies of the East, many of which have formulated their own development models. Another related
debate is between ‘standard of living’ measured through the quantum of consumption of goods on one
hand, and human welfare and happiness on the other. The two can be measured only indirectly through
metrics, and the emphasis is now gradually shifting from the former to the latter. Economic growth has
traditionally been measured by a growth in standards of living over a period in time, though these are
increasingly being called into question as the impact of human endeavour on the environment is also
being assessed. 2
Developmental Economics is a sub-field of Economics which deals with economic aspects of the
developmental process in relation to low income countries. Its focus is not only to improve economic
growth, economic development and structural change, but also to improve the potential of the
population through access to better health, and education. Developmental Economics takes into
account social conditions to formulate better context-specific plans. This branch of Economics also
incorporates theory-formulation and building to further its goals. This school took off with the ideas of
mercantilists, neo-mercantilists and nationalists. According to Jeffrey D. Sachs, Andrew Mellinger and
John Gallup, a nation’s geographical location and topography also play a role in its success. The theory of
comparative advantage, and the idea that nations should specialize in certain goods and services only,
forms a part of developmental economics, and this idea was originated in 1817 by David Ricardo based
on Adam Smith’s theory of absolute advantage which he formulated in 1776.
This theory is based on the Factor Endowment theory which states that different nations are endowed
with different resources. This theory has however been criticized on pragmatic grounds within
the import substitution industrialization theory of development economics, by Hans Singer and Raul
Prebisch. Much has been written since Ricardo as commerce has evolved and cross-border trade has
become more complicated. Today, trade policy tends to focus more on "competitive advantage" as
opposed to "comparative advantage". This may refer to any attribute that may cause a set of
organizations to outperform its competitors. Some competitive strategies were proposed by Michael
2
The growth delusion: The wealth and well-being of nations, David Piling, Bloomsbury Publishing, 2018

Porter and others in the 1950’s. Another notable theory in Developmental Economics is the linear stages
of growth model developed by W W Rostow which divides growth into five distinct stages. These are the
traditional society, pre-conditions for take-off, the take-off, the drive to maturity, and the age of high-
mass consumption. 34
Welfare economics is a branch of economics which uses microeconomic techniques to evaluate welfare
and well-being at an aggregate or an economy-wide level, and is based on the work of Arthur Cecil Pigou
who published an important book titled “Economics of Welfare” in 1920. It studies how the distribution
of goods and resources can be effected to maximize human welfare and well-being, and seeks to
formulate norms and criteria to this effect to achieve ‘Social Welfare Maximization’ and human
satisfaction through objective approaches. As noted by Bentham, Social welfare stems from the greatest
happiness of the greatest number, and is tied to the science and economics of happiness. However, the
roots of Welfare Economics can be traced to theories such as consumer surplus which were first
formulated by Dupuis in 1844. These were further refined by Alfred Marshall in his ‘Principles of
Economics’ published in 1890, and is sometimes referred to as ‘Old Welfare Economics’. Other theories
of Welfare Economics have included Kandor-Hicks Compensation theorem which deals with relative
rises or decreases in incomes of different groups of individuals but was criticized for its limited practical
value (This is a part of New Welfare Economics) and Hicks optimal outcome which deal with re-
allocation of resources in a Welfare society, Scitovsky Double Criterion which is an important paradox in
welfare economics, Social Welfare Function of Bergson and Samuelson which considers welfare for a
given set of individual preferences and welfare rankings, and Amartya Sen’s views on Social Welfare
with link welfare with quality of life, and not just wealth.
Welfare economics is tied to the field of public economics, which is a study of how government may
promote social welfare in different conditions. Welfare is a type of government support usually provided
for a specific class of citizens in that society, usually to the elderly or disabled. In other societies,
governments choose to provide minimum nutritional or income support. Sometimes social or merit
goods such as healthcare and education are provided either free of cost, or at a subsidized rate. The idea
of Social security dates back to the Bismarck government in Germany in 1899, though many nations now
have social security systems of some kind. Welfare economics seeks to minimize deadweight loss, and
maximize growth and efficiency with equity. Social Welfare may be paternalistic, where individual
preferences count little. On the other hand, as per the Paretian approach, Social Welfare is the
aggregated total of the welfare of individuals. The third approach is based on interpersonal comparison
of utility, and was developed by Bergsen and Samuelson in their Social Welfare function. The second and
third approaches would ideally form the foundation of Anthropological Economics.
Therefore we have many nations to look up to as role models besides the USA and other western
nations, examples being Scandinavian countries and Canada. Thus, ”mindless neoliberalism” must be
frowned upon.(This, incidentally is a left-wing word). We have moved from Fabian socialism and a
centrally planned economy (when India was stuck with a “Hindu” rate of growth) to a market economy;
we must now move towards more equitable development models, and growth with equity or inclusive
3 Developmental Economics: Debraj Ray, Princeton University Press, 1998
4 Essentials of Developmental Economics, Second edition, J Edward Taylor, Travis JL

growth; Thus, mindless initiatives such as complete bank privatization must be stopped forthwith; we
must focus on agriculture which has vast untapped potential; there are new technologies such as drip
irrigation; drone technologies, vertical farming among others which are yet to be widely disseminated,
and agricultural productivity is improving only slowly.
We are now focussing on manufacturing as well, and moving away from services led growth. We are
also focusing on health and women’s reproduction, and sanitation through the national rural health
mission, Swachh Bharat mission, and other schemes, and the total fertility rate which is a synthetic rate
representing the number of children an imaginary woman could be expected to bear based on current
birth rates has been brought down to replacement level, or 2.1. There must also be no room for
pronatalist arguments which are borrowed slavishly from other developed nations with different ground
realities. We have a basic form of social security in place, in the form of ration cards, under the National
food security act of 2013. All these are good things, because they will pull millions more out of poverty.
We must also look beyond a narrow range of metrics such as GDP size and GDP growth rate, to a more
comprehensive set of metrics some of which were discussed in our paper on Anthropological
Economics. Thus, social sciences and economic theory must develop in relation to the needs of
developing countries. This is what our globalization of science movement is all about. Indian states must
also learn from each other; for example, we have had the Gujarat model of development which was
criticized in some quarters, the Odisha model of development which has seen a lot of success lately, and
the Dravidian model of governance. In Andhra Pradesh, the former Chief Minister Chandrababu Naidu
focussed excessively on Hyderabad, then Amaravati while his arch rival of the YSRCP focused excessively
on welfarism to the detriment of other sectors of the economy.

Chapter 1 History of
Economics

Economics is one of the oldest fields of study, and one of the most important field of study in the social
sciences. Economic problems and problems of survival have pre-occupied humans since pre-historic
times. The American historian of Economic thought Robert Heilbroner described economics as a
"Worldly Philosophy" because it is concerned with matters of how our material wants are best served
with limited resources.Economics is the science that deals with economies, and studies the functioning
of economies too. It also deals with the production, consumption and transfer of wealth in relation to
factors of production such as land, labour, capital and entrepreneurship. It also studies the behavior and
functioning of economic agents and actors, and how they function in diverse situations. The science of
economics pervades virtually every aspect of human life, and its applications are wide-ranging and far-
reaching. Many definitions have been provided for Economics, and we reproduce a few below. The
eminent economist John Stuart Mill defined Economics as “The science which traces the laws of such
phenomena of society that arise from the combined operations of mankind for the production of
wealth, in as far as those phenomena are not modified by the pursuit of any other object.”
According to Alfred Marshall, “Economics is a study of man in the ordinary course and business of life. It
investigates how he gets his income and how he uses it. Thus, it is on one side, the study of wealth and
on the other and more important side, a part of the study of the nature of man.”Some Economists have
also emphasized the judicious use of scarce resources and trade-offs wherever necessary through
economizing, though technology in the form of sustainable solutions may eventually make this
definition less relevant, and usher in a new era in Economic theory. A scarcity based definition has been
provided by Lionel Robbins who states, “Economics is a science which studies human behavior as a
relationship between ends and scarce means which may have alterative uses.”Economics is therefore
sometimes referred to as the science of ‘constrained choice’. Economics is broadly divided into
microeconomics and macroeconomics. The field of Microeconomics studies the economic behavior and
decision-making processes of individuals and economic decision makers. On the other hand,
Macroeconomics studies the functioning of the economy as a whole through the use of suitable metrics
and indicators, and analyses entire industries and economies. 5678
The history of economic thought comprises different thinkers and theories in the subject that is now
known as economics, from the ancient times to the 21st Century, and Economics has comprised many
different schools of thought down through the ages. The history of Economic thought does not however,
include the study of economic events such as the Great Depression or the more recent Dot.com bubble;
thus, this field is more theory and philosophy-oriented than history-oriented. In Ancient Greece, the
polymath Hesiod who was a contemporary of Homer, wrote the earliest known work concerning the
basic origins of economic thought, in the Seventh Century BC. The Greek philosopher Aristotle also
examined ideas about wealth acquisition, and questioned whether property was best left in private or
5 Economics: Nineteenth Edition, PAUL A. SAMUELSON, Institute Professor Emeritus, Massachusetts Institute of Technology, WILLIAM D.
NORDHAUS, Sterling Professor of Economics, Yale University
6
Blaug, M. (1997).Economic theory in retrospect (5th ed.). Cambridge, UK: CambridgeUniversity Press
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MICROECONOMICS: FOURTH EDITION, DAVID A. BESANKO, Northwestern University,Kellogg School of Management RONALD R. RAEUTIGAM,
Northwestern University, Department of Economics, The University of Chicago, Booth School of Business, JOHN WILEY & SONS, INC.
8
MICROECONOMICS: Principles and Analysis, Frank A. Cowell, STICERD and Department of Economics, London School of Economics, December
2004

public hands. He also analyzed different forms of the state such as monarchy, aristocracy, democracy,
oligarchy, and tyranny. Xenophon of Athens authored ‘Oeconomicus’ in the fourth century BC,and this
was an important treatise on household management and agriculture. Plato’s famous work ‘The
republic’ discussed forms of government, specializations of labour and production, and also developed a
credit theory of money. In Ancient China, Fan Li, an adviser to King Goujian of Yue of the fifth century
BC, wrote on economic issues and developed a set of "golden" business rules. In Ancient India, Chanakya
who lived during the Mauryan Empire, wrote the Arthashastra which was a treatise on statecraft,
economic policy and military strategy. The Arthashastra which was compiled between 300 BC and 200
CE, stated that there were four important fields of knowledge, i.e., the Vedas, the Anvikshiki (the science
of enquiry), the science of government and the science of economics, which included cattle, business
and trade.
Thomas Aquinas (1225–1274) was an important Italian economic writer and a Catholic priest. He was a
part of a group of Catholic scholars known as ‘the Schoolmen’. In his unfinished treatise ‘Summa
Theologica’, Aquinas developed the concept of a just price, which is similar to the modern concept of
long run equilibrium, a price that was just sufficient to cover the costs of production, including the
maintenance of a worker and his family. He opined that it was immoral for sellers to raise their prices
beyond this point, and for lenders to charge interest on loans. One of Aquinas' main critics was however,
the Scottish philosopher Duns. In his work ‘Sententiae’ published in 1295, he argued that buyer and
seller usually have different concepts of a just price. If people did not benefit from a transaction, they
would not choose to trade. Another early economist French philosopher Jean Buridanwas the originator
of the metallic theory of money, and looked at money from two different angles: its metal value and its
purchasing power, which he acknowledged could vary. He argued that aggregated, not individual,
demand and supply determined market prices. Therefore, according to him a just price was what the
society collectively and not just one individual is willing to pay. Another French philosopher and priest
Nicolas d'Oresme published a notable work about the origin and nature of money. Saint Antoninus of
Florence was another influential writer who addressed issues of social and economic development, and
was among the first to argue that the state had a duty to intervene in mercantile affairs for the common
good, and an obligation to help the poor and needy too. 9
The fourteenth century Islamic writer Ibn Khaldoun was another important intellectual who developed a
theory of the lifecycle of civilizations, the specialization of labor, and the value of money as a means of
exchange rather than as a store of inherent value. He also developed ideas on just taxation, but his work
was not immediately recognized in the west. In the Western world, economics was not considered to be
a separate field of study, but part of philosophy until the 18th–19th century Industrial Revolution and
the 19th century Great Divergence, which accelerated economic growth in the Western world, and
eclipsed development elsewhere.
Mercantilism dominated Europe from the sixteenth to the eighteenth century, as it emerged from
feudalism and the dark ages, and headed towards proto-industrialization. After the voyages of
Christopher Columbus, Ferdinand Magellan, James Cook, Balboa and other explorers opened up new
9
Medema, S., & Samuels, W. J. (2003).The history of economic thought: A reader.London: Routledge

opportunities for trade with the New World, monarchies wanted external trade to boost their economic
power. Mercantilism was a political movement and an economic theory that advocated the use of the
state's powers to ensure that local markets and supply sources were protected from imports, and
exports and one-way trade boosted. Mercantile theorists and advocates such as Jean-Baptiste Colbert
believed that international trade could not benefit all countries at the same time. According to their
view, Money and precious metals were the only source of riches. Therefore, tariffs should be levied on
imports and measures used to encourage exports, which bring money into the country. In other words,
a positive balance of trade must be maintained, and imports discouraged at all costs. Even though
Mercantilism was never elevated to the level of a systematic scientific theory, mercantilist ideas
manifested themselves in many acts such as the Navigation Act of 1651 and the Sugar Act of 1764, and
such policies were implemented by the British and the Dutch East India Companies. The term
mercantilism was however not coined until 1763, by Victor de Riqueti, Marquis de Mirabeau, and
popularized by Adam Smith in 1776, who opposed it.
In the sixteenth century, the Jesuit School of Salamanca in Spain initially founded by Spanish theologians
took economic theory to a new high, but their contributions remained largely forgotten until the 20th
century until they were brought to light by Austrian Economist Joseph Schumpeter in his ‘History of
Economic Analysis’ published in 1954, and by the English Economist Marjorie Grice-Hutchinson. This
school is often referred to as the ‘first economic tradition’ in the field of economics, and important
contributors were Martin de Azpilcueta, Luis de Molina, Jean Bodin, Domingo de Soto and Tomas de
Mercado. The University of Salamanca and the University of Coimbra played a major role in this
tradition. 10
In 1516, the English humanist Sir Thomas More published his work ‘Utopia’, which described an ideal
society where land was owned in common and there was universal education and religious tolerance,
which later inspired the Laws of 1587 and the communism-socialism movement on the Nineteenth
century. In 1517, astronomer Copernicus originated the quantity theory of money which states that the
general price level of goods and services is directly proportional to the money in circulation. In 1519, he
published the earliest version of what later came to be known as Gresham's Law. According to this law,
“Bad money drives out good money".
In 1568, French jurist and political philosopher Jean Bodin published the first known analysis of inflation
endorsing the quantity theory of money. In 1598, French mercantilist economist Barthelemy de
Laffemas published a work containing the first known mention of under-consumption theory, which was
later refined by John Maynard Keynes. Debates over free trade and the desirability of government
regulation of companies date back to 1622 when English merchants Edward Misselden and Gerard
Malynes had a heated discussion on the desirability of state regulation. In the Sixteenth century, the
English Economist Thomas Munstrongly advocated mercantilist policy, and became the last among the
early Mercantilists, even though his works were not published until his death.
10
Paola Tubaro. History of economic thought.Rhona C. Free. 21st Century Economics: A Reference Handbook, Sage Publications

The English Economist Sir William Petty is often considered to be the first ‘Scientific Economist’ because
he applied the scientific tradition of Francis Bacon to Economics, using measurable phenomena and
quantitative precision, and putting to use statistical mathematics in his analysis too. This preceded
econometrics by several centuries. During the time of King Louis XIV in France, national guilds were used
to regulate major industries, and this is regarded as the first attempt to regulate industry by
government. In 1695, French economist Pierre Le Pesant, Sieur de Boisguilbert became the first
economist to question mercantile economic policy and chose to value the wealth of a country by its
production and exchange of goods instead its assets. Hugo de Groot and Anders Chydenius were among
the earliest Economists to advocate free trade, and they expressed their ideas in legal terms. In 1696,
British mercantilist Charles Davenant became the first economist to study consumer demand and
perfect competition. In 1767, Scottish mercantilist economist Sir James Stuart published “An Inquiry into
the Principles of Political Economy”, which was the first complete economics treatise.
The British Enlightenment took place in the Seventeenth and Eighteenth centuries riding on the general
renaissance in Europe, and spurred the advancement of economic thought. Irish-French Economist
Richard Cantillon wrote an important treatise on human reason and market competition in the
economic world in 1730, and his works came to be known as “the cradle of political economy”. Another
important English enlightenment thinker John Locke combined philosophy, politics and economics to
form a logical and a coherent framework. Locke believed that people contracted into society, which was
bound to protect their property rights. He defined property to include people's lives and liberties, and
their wealth. Locke argued that not only should the government stop interference with people's
property, but also that it should work to ensure their protection.
Dudley North and David North were other influential economists of the era, and both opposed the
unintended consequences of mercantilism. A Frenchman named Vincent de Gournay was one of the
early Physiocrats, which is derived from a Greek word meaning "Government of nature", and believed
that agriculture was the main source of wealth, an idea also mirrored by Francois Quesnay. He also
opposed government regulation, stating that it inhibited commerce and trade. The Physiocrats criticized
cities for their artificial ways of life and advocated natural styles of living. The Physiocrats' economic
theory, had the notion of a circular flow of income throughout the economy. Others like Anne Robert
Jacques Turgot who advocated liberalism, divided society into three classes: the productive agricultural
class, the salaried artisan class and the landowning class. In 1751, Neapolitan philosopher Ferdinando
Galiani published a treatise on money called Della Moneta (On Money), 25 years before Adam Smith's
‘The Wealth of Nations’, which is one of the earliest modern economic analysis. It covered all modern
aspects of monetary theory, including the value and origin of money, its regulation, and inflation.
The Scottish Philosopher Adam is widely considered to be the father of modern Economics and played a
key role in the Scottish Enlightenment. His 1776 publication ‘An Inquiry Into the Nature and Causes of
the Wealth of Nations’ coincided not only with the American Revolution, but also with the dawn of a
new industrial revolution that led to increased levels of prosperity. Adam Smith believed in the self-
regulating invisible hand, and that the idea that wealth was derived solely by self-interest, and not by
benevolence, magnanimity or charity. Thus, Adam Smith advocated a free market economy, based on
secure property, capital accumulation, widening markets and a division of labour with only a limited role

for the government. He was therefore opposed to mercantilism, which he felt stunted specialization.
Smith also studied productive and non-productive labour, and its role in economic development. Adam
Smith’s ideas were later developed by William Pitt the Younger, and other economists. Other leading
thinkers of the age were Jeremy Bentham who developed the concept of utilitarianism to maximize
happiness and minimize pain, David Ricardo, known for his theory of Comparative Advantage, and Jean-
Baptiste Say who developed Say’s law which stated that supply always equaled demand.
John Stuart Mill was another dominant figure of political economic thought of his time, and one of the
most influential thinkers in the history of classical liberalism. Mill's textbook, published in 1848, and
titled ‘Principles of Political Economy’ was a summary of the economic thought of the time. Mill adopted
a middle ground between Adam Smith's view of expansion due to trade and technological innovation
and Thomas Malthus' view of the limits of population growth and imagined imminent famine due to
food shortages as expounded in “Essay on the Principle of Population”. Another important theory of this
period was the labour theory of value, which argued that the economic value of a good or service was
determined by the socially necessary labour required to produce it. This contrasted with value deriving
from a general equilibrium theory of supply and demand. A school within classical economics
formulated the under-consumption theory. This theory argued for government action to mitigate
unemployment and economic downturns, and was a predecessor of Keynesian economics of the 1930s.
Another notable school was Manchester capitalism, Manchester liberalism or Manchesterism of Richard
Cobden and John Bright, which advocated free trade, and government policy based on free trade.
The German philosopher Karl Marx was a leading thinker of his day (and one of the most influential
thinkers till date) and wrote ‘Das Kapital’ which along with his ‘Communist manifesto’, became his most
important and well-known works. He also introduced new concepts such as the bourgeoisie and the
proletariat. According to Marx, Capitalism was based on exploitation and inherent contradictions, and it
would eventually lead to revolution by the masses, and the establishment of a classless society. In this
society, the means of production would be commonly owned by the proletariat. Marx used the word
"commodity" and stated that when people mixed their labor with an object it became a "commodity".
However, commodities have a dual nature, a dual value. He distinguished the use value of a thing from
its value. The use value of a commodity existed only as that commodity is used or consumed. Marx
claimed that employers pay their workers less in "exchange value" than the workers produce in "use
value". The difference, in Marx's terminology, is "surplus value". Capitalism according to Marx, is a
system of exploitation.
With every economic boom and recession, Marx claimed, conflict between capitalists and workers
would increase. In Marxist theory, society consists of two parts, the base and the superstructure. The
base comprises the forces and relations of production, and determines the superstructure which
determines culture, institutions and power structures of a society. Thus, Marxist theory greatly
emphasized material needs of society. However, his vision of a utopia did not come to pass, and his
theories led to totalitarianism, with most communist societies degenerating into dictatorships. Marx
also never understood the dynamism and flexibility of Capitalism and its potential to create wealth.
Marxism also incorporates methods of socioeconomic analyses that views class relations and social

conflict using a materialist view of history, and a dialectical view of social transformation, and strongly
influenced historiography as well.
In 1879, the American Economist Henry George published a treatise on why poverty accompanies
progress and boom follows bust which was widely circulated. Henry George is recognized as the
inspiration for the economic philosophy known as Georgism. This philosophy states that while people
should own the value they produce themselves, economic value from land and natural resources should
belong to all members of society. His work led to the dawn of the Progressive Era, and the reforms that
accompanied it. Georgism declined in the second half of the 20th Century as the Marxist and Austrian
and Keynesian neoclassical schools gained popularity. Paul Samuelson listed Henry George as one of the
six "American saints" in classical economics, and he partially influenced many modern writers such as
Joseph Stiglitz and Milton Friedmann.In 1895, the London School of Economics (or the LSE in short) was
founded by Fabian Society members (The Fabian society had been founded in 1884 and was named
after the Roman general Quintus Fabius Maximus) Sidney Webb, Beatrice Webb, R H Tawneyand George
Bernard Shaw, for the betterment of English society and for the advancement of democratic socialism
through a gradual process rather than a sudden overthrow. It merged with the University of London in
1900, and began its own degree courses in 1901. Fabian Socialism later came to be associated with
economic stagnation and decline, and was adopted in different guises in different parts of the world.
economics was another school of Economics which developed in the 1870s, focusing on the
determination of goods, outputs and income distributions in the markets through supply and demand,
though the term was introduced by Thorstein Veblen only in 1900. Further definitions of Neo-classical
economics were provided by Colander, Rosser and Holt (2004), and by Arnsperger and Varoufakis
(2006). There were manybranches in Neoclassical Economics such as the Austrian school, Cambridge
School, and the Lausanne school, and the term is sometimes used as an umbrella term to cover other
concepts. The Cambridge School was founded with the 1871 publication of Jevons' ‘Theory of Political
Economy’, and developed theories of partial equilibrium focusing on market failures. Its adherents were
Stanley Jevons, Alfred Marshall, Arthur Pigou and Francis Y. Edgeworth, and many of these Economists
laid the foundations for modern Microeconomics. The Austrian School of Economicscomprised Austrian
economists Carl Menger, Eugen von Bohm-Bawerk, and Friedrich von Wieser, who developed the theory
of capital and tried to explain economic crises.
The Lausanne School, led by Leon Walras and Vilfredo Pareto, was the third school which developed the
theories of General Equilibrium and Pareto efficiency. It was founded with the 1874 publication of
Walras' Elements of Pure Economics. Walras suggested that free markets tended towards equilibrium in
the long run, and served the needs of countries very well. In 1933, Joan Robinson and Edward H.
Chamberlain published works on imperfect competition and monopolistic competition, taking
Neoclassical Economics in a new direction. Neoclassical Economics along with Keynesian Economics
dominates mainstream microeconomics today, although it has not been free from criticism. The British
Economist Alfred Marshall is also credited for his attempt to use mathematical analysis in economics,
and transform it into a more scientific profession without obliterating the basic concepts of Economics.
He was the first professor of economics at the University of Cambridge, and abandoned the term
"political economy" for the term "economics". Economic schools of thought are also sometimes

classified into orthodox schools and heterodox schools, where the latter is based on a criticism of the
former, and often recommends radical approaches.
William Stanley Jevons popularized the marginal utility theory which states that the marginal
satisfaction of goods and services decreases as consumption increases. An example of the Theory of
Diminishing Marginal Utility is that for every cake one eats, one gets less and less pleasure until an
additional cake makes an individual sick. This was later developed into the Equimarginal Principle which
states that an individual arranges his consumption so that the last dollar spent on each good brings him
the same marginal utility. The principles of Marginal Utility were also used to solve several real-world
problems such as the famous water-diamond paradox. Other Economists formulated the marginal
theory of value and the General Equilibrium theory which states that the interacting forces of demand
and supply bring about equilibrium. Thus, marginalism also explains for example, why the price of
diamonds is higher than water- this is because diamonds have a higher marginal utility than water. Some
other Economists proposed the Constancy of the Marginal Utility of Money which stated that the
marginal utility of money was constant. When economics at was beginning to be dominated by
mathematical analysis, the followers of Carl Menger, Eugen von Bohm-Bawerk and Friedrich von Wieser
(1851–1926) began the use of deductive logic in Economics instead. This group became known as the
Austrian School of Economics, reflecting the Austrian origin of many of the early adherents.
In 1881, Irish economist Francis Ysidro Edgeworth introduced indifference curves (a graph that shows a
combination of two goods that gives customers equal satisfaction and utility, thereby making them
indifferent) and the generalized utility function (preferences regards goods and services), along with
Edgeworth's Limit Theorem (examines range of possible outcomes which results from free market
exchange or barter), extending the Bertrand Model to handle capacity constraints, and proposing
Edgeworth's Paradox where two players cannot reach a state of equilibrium with pure strategies, each
charging a stable price.
Friedrich Hayek argued that the market was a "spontaneous order" and actively disparaged the concept
of "social justice". Ludwig von Mises' criticism of socialism had a major influence on the economic
thinking of Austrian School of economics. Hayek believed that centralizing economic decision-making
would lead not only to infringements of liberty but also to lower standards of living.In the mid-1840s,
German economist Wilhelm Roscher founded the German historical school of economics, which
promoted the cyclical theory of nations—economies passing through youth, manhood, and senility. This
theory became popular in British and American circles as well. In the 1890’s, Thorstein Veblen became
one of the best-known early critics of the "American Way". In his 1899 work, ‘The Theory of the Leisure
Class’, he scorned materialistic culture and profiteering. In 1911, Joseph Alois Schumpeter introduced
the concept of innovation in his work “Theory of Economic Development”, and explained how
innovation was a driver in Economic growth.
After World War I, there was a major economic boom in the USA which is known as the roaring
twenties. This was followed by the Wall Street Crash of 1929 which led to the Great Depression. The
most important development in economic thought during the Great Depression was the Keynesian
revolution, triggered by the publication in 1936 of ‘The General Theory of Employment, Interest, and

Money’ by the British Economist John Maynard Keynes. His approach criticized laissez-faire economics,
and advocated more governmental control. It studied the impact of spending on output and inflation,
and unlike economists and governments of the era, advocated increased government expenditure to
pull economies out of the then prevailing Great Depression. His ideas were eventually implemented by
Franklin D. Roosevelt in the 1930’s, and led to a sustained economic recovery. Better control of private
businesses was also advocated by Adolf Berle and Gardiner C. Means during the Great Depression. In
1933, American economist Edward Chamberlin published “The Theory of Monopolistic Competition”.
The same year, British economist Joan Robinson published “The Economics of Imperfect Competition”.
Together, they founded Industrial Organization Economics which examines the relationship between
firms and markets. Chamberlin also founded Experimental Economics which deals with the application
of experimental methods to study economic questions.
In the 1930s, Ragnar Frisch and Jan Tinbergen pioneered Econometrics which used statistical methods in
economic analysis, receiving the first Nobel Prize in Economics in 1969. After the war,Wassily
Leontiefdeveloped the Input-Output Model of economics, which uses linear algebra and was suited to
computers, receiving the 1973 Nobel Economics Prize. After World War II, Lawrence Klein pioneered the
use of computers in econometric modeling, receiving the 1980 Nobel Economics Prize. Ragnar Frisch's
assistant Trygve Haavelmo received the 1989 Nobel Economics Prize for clarifying the probability
foundations of econometrics and for analysis of simultaneous economic structures.
The government-interventionist monetary and fiscal policies that the postwar Keynesian economists
recommended were severely criticized by economists at the University of Chicago, forming a part of the
Chicago School of Economics. Before World War II, the Old Chicago School of Keynesians was founded
by Frank Knight, Jacob Viner, and Henry Calvert Simons. The second generation reasserted a libertarian
view of market activity which promoted non-interference in people’s affairs. Milton Friedman of the
Chicago School of Economics is one of the most influential economists of the late 20th, century,
receiving the Nobel Prize in Economics in 1976. He is known for “A Monetary History of the United
States” (1963), in which he argued that laissez-faire government policy is more desirable than
government intervention in the economy. Friedman was also known for his work on the consumption
function, and the Permanent Income Hypothesis of 1957. This work stated that rational consumers
would spend a proportional amount of their permanent income, and windfall gains would mostly be
saved. His other important contributions include his critique of the Phillips Curve, and the concept of the
natural rate of unemployment published in1968.
In 1898,the American Economist Thorstein Veblen coined the term Evolutionary economics, making use
of anthropology to deny that there is a universal human nature, emphasizing the conflict between
"industrial" or instrumental and "pecuniary" or ceremonial values, and this came to be known as the
Ceremonial/Instrumental Dichotomy. He was a well-known critic of capitalism, and developed the term
conspicuous consumption which was further developed by C. Lury, D. Slater, Jean Boudrillard and
others. Joseph Alois Schumpeter was an eminent Austrian School economist and political scientist of the
period known for his work on business cycles and innovation. In 1944, Hungarian-American
mathematician John von Neumann and Oskar Morgenstern published Theory of Games and Economic
Behavior, founding Game Theory, and the theory of non-competitive games, which was widely adopted

by economists. In 1951, Princeton mathematician and Nobel Prize winner John Forbes Nash Jr. published
the article Non-Cooperative Games, becoming the first to define a Nash Equilibrium for non-zero-sum
games.
After World War II, Canadian-born American Economist John Kenneth Galbraith became one of the
activists for pro-active government and liberal-democrat politics. In “The Affluent Society” (1958),
Galbraith argued that voters reaching a certain material wealth begin to vote against the common good.
He also argued that the "conventional wisdom" of the conservative consensus was not enough to solve
the problems of social inequality. Businesses set prices and use advertising to create artificial demand
for their own products, distorting people's real preferences. Consumer preferences are highly influenced
by corporations. Post-war economists began to synthesize Keynes' work with mathematical
representations. Economics courses began to present economic theory as a unified whole in what is
referred to as the neoclassical synthesis. This school absorbed the macroeconomic thought of Keynes
into Neoclassical Economics. "Positive economics" became the term created to describe certain trends
and "laws" of economics that could be objectively observed and described in a value-free way, separate
from "normative economic" evaluations and judgments. The Paul Samuelson's “Foundations of
Economic Analysis“ published in 1947 was an attempt to show that mathematical methods could
represent a core of testable economic theory. His introductory textbook Economics was influential and
widely adopted. It became the most successful economics text ever. Paul Samuelson was awarded the
new Nobel Prize in Economics in 1970 for his merging of mathematics and political economy.
In the early 1970s, American Chicago School economist Robert E. Lucas, Jr. founded New Classical
Macroeconomics based on Milton Friedman's monetarist critique of Keynesian macroeconomics, and
the idea of rational expectations, first proposed in 1961 by John F. Muth, opposing the idea of
government intervention in the economy. The Policy-Ineffectiveness Proposition of Thomas J. Sargent
and Neil Wallace, which seemed to refute a basic assumption of Keynesian economics was also adopted.
The Lucas aggregate supply function states that economic output is a function of money or price
"surprise." Lucas was awarded the 1995 Nobel Economics Prize. The Freshwater or the Sweetwater
school of economics of the 1970’s challenged many of the earlier assumptions in Macroeconomics and
was based the faculties of the University of Chicago, Carnegie Melon University, and Cornell University.
These terms were coined by Robert E. Hall in 1976. This period also saw the emergence of the ‘synthesis
school’ which attempted to integrate several disparate concepts in microeconomics and
macroeconomics. Achieving a consensus however proved elusive, and there was no single widely
recommended approach.
In 1979, American economist Paul Krugman published a paper founding ‘New trade theory’, which
explained the role of increasing returns to scale and network effects in international trade. In 1991 he
published a paper founding ‘New economic geography’. His textbook ‘International Economics’ (2007)
became extremely popular. He was awarded the Nobel Prize in Economics in 2008. Indian economist
Amartya Sen expressed skepticism about neoclassical assumptions, and was highly critical of rational
expectations theory proposed by John F. Muth and used by Robert Lucas Jr. and others, devoting his
work to Development Economics and human rights. Sen's work in the field of development economics
has had considerable influence in the formulation of the "Human Development Report",published by

the United Nations Development Programme. Sen was awarded the Nobel Prize in Economics in 1998. In
2019, Abhijit Banerjee, Esther Duflo and Michael Kremer won the Nobel Prize for their experimental
approach in alleviating global poverty. Another interesting sub-field in Economics is Economic history
which is the historical study of Economies, and research in this field is conducted using historical
methods, statistical methods, and the application of economic theory to historical analysis using and
qualitative data. Niche areas such as Feminist Economics whose foundations have been laid by Barbara
Bergmann and others have also been proposed in the recent past.
Newer approaches are also being tried all the time. For example, Jeffrey D. Sachs has helped Eastern
European economies merge with western economics after the fall of the Iron curtain, through his
unique strategies. Heterodox Economics comprises fields of economic thought which contrast with
orthodox schools of Economic thought these include institutional, evolutionary, feminist, social,
ecological, and anarchist economics, to name a few. Movements promoting pluralism in Economics have
tried to incorporate a wide variety of viewpoints in formulating economic theory, even though these
have sometimes been labeled fringe by mainstream Western economists. However, very little has been
done yet to take into consideration the views of developing countries while formulating policy and
concepts, though there is a growing realization of the need for alternative developmental models in
many parts of the world such as India. The New Left is a political movement which seeks to make
Marxist ideas and ideals relevant to the 21st
Century and owes its existence to the ideas of Herbert
Marcuse and others, and was popularized by Bhaskar Sunkara, Lucio Margi, Ralph Miliband, Perry
Anderson and other intellectuals. The New Left began as a political movement in the west, and
comprised of western activists and intellectuals. According to some, it was a reaction against traditional
Marxist ideas of dialectical materialism and class struggle. It was also related to the New Communist
Movement which was a diverse left-wing political movement in the United States in the 1970’s and
1980’s. It comprised groups such as the Bay Area Revolutionary Union and other groups. The term ‘New
Left’ was popularized in the writings of the Sociologist C. Wright Mills, and the term can be traced way
back to the year 1960, in a letter penned by him. Socialism in some form is supported today by American
thinkers such as Bernie Sanders and Noam Chomsky and other associations throughout the world. 1112
In India, we have had many eminent economists of repute. For example, we have had the eminent
Nobel Laureate Amartya Sen. Amartya Sen has made seminal contributions to various fields of study
such as welfare economics, economic and social justice, social choice theory,. economic theories
of famines, development economics, public health and welfare, and measures of well-being of
countries. Raghuram Rajan served as economic advisor to government of India, and was involved in
policy making decision. Abhijit Banerjee made important contributions to welfare economics. Bibek
Debroy chairman of the Economic advisory council to the Prime Minister of India, Montek Singh
Ahluwalia former deputy chairman of the planning commission, C. Rangarajan, former governor of the
Reserve Bank of India and Manmohan Singh, former member of the planning commission, finance
minister and prime minister who was instrumental in dismantling the license raj, were other important
Indian economists.
11
Foundations of Economics: Fourth Edition, Andrew Gillespe, Oxford, 2016
12
Economics, Paul Samuelson, William D Nordhaus, 19th
Edition, Tata McGraw Hill, New Delhi, 2010

The overview presented above should serve to demonstrate that most economic models have been
largely Euro-centric in their orientation given that economic theory evolved primarily in the West.
Cultural factors and cultural differences around the world have been largely ignored in economic
analysis, as also the fundamental differences between the natures of economies of developed and
developing countries (the latter are characterized by extreme differences in wealth and socio-economic
disparities as well). Before the fall of the Iron curtain, most developing countries leant towards alien
Marxist or centrally-planned models, or watered down alternatives like Fabian socialism. After the
1980’s, developing countries were mostly rudderless, and swung towards capitalistic models of growth
which did not suit their needs particularly well either. The idea that developing countries must therefore
play a major role in formulating economic theory in the Twenty-first century and beyond, is one of the
foundational principles and the guiding force behind this approach, and can potentially lift billions out of
poverty. This is in tune with our philosophy of the ‘Globalization of Science’, particularly social sciences.
In the next few pages we will attempt to show, that while an interface between Anthropology and
Economics has indeed been attempted by many scholars, such efforts have largely been piecemeal, and
driven primarily by western interests and perceptions. The time has therefore arrived to integrate
Anthropology and Economics much more robustly keeping in mind the potential downstream
implications of such endeavours.

Chapter 2 History of the
Indian economy Part 1

The transition of humans from hunting and foraging to settled farming is one of the turning points in
human history, and this is called the Neolithic revolution. This revolution which may have begun in the
Levant or the fertile crescent, is extremely important because it predated the emergence of the world’s
first agricultural settlements as opposed to the seasonal mobility of peoples of earlier times. This also in
turn, led to the domestication of animals. Some experts also believe that the growth of farming led to a
rapid expansion of peoples in many different parts of the world, and people gradually settled into large
cities. This also led to the development of crafts such as pottery, better tools, cooking utensils, pestles,
urns, and sophisticated metallurgy of different types, and eventually to centralized city states and
writing. Many different crops such as wheat, barley, and chick peas also eventually began to be
domesticated. In India, Mehrgarh near the Bolan Pass in Baluchistan in present-day Pakistan, is the
earliest agricultural settlement in the Indian sub continent known to us through archeological evidence,
and is dated to the seventh millennium before Christ. Given that agriculture appeared here suddenly, it
most likely was imported from a region further west, say, Iraq.
It is from Baluchistan, that the epicenter of human activity moved further east to the Indus valley. The
period beginning around 3300 BC saw some significant changes in the Indus region, as bigger
settlements began to be formed. This period is known as the early Harappan period, or the Kot Diji
phase. During this phase, an agricultural surplus began to be produced, and this in turn, led to the
emergence of much larger cities. The metal age also began, as copper, bronze began to be produced.
The mature Harappan civilization flourished along the course of the Indus river and the now dry Ghagra
Hakkar river, sometimes also known as the Saraswathi river starting from around 2600 BC. The
civilizations most important sites, Mohenjodaro and Harappa were excavated in the 1920’s, though its
ruins were noted as early as the middle of the nineteenth century. The cities of the Indus valley
civilization were well-planned, had baked brick houses and multi storey tenaments,
underground drainage and sewerage systems, external water supply systems, irrigation systems etc,
besides metallurgy, and long-distance maritime trade. Mohenjo-daro and Harappa may have had over
fifty thousand individuals, and the civilization may have contained between one and five million
individuals during its peak. During the mature Harappan period, gold, silver, and tin began to be
produced as well. We also have elaborate town planning during the mature Harappan phase, citadels,
and arts and crafts specialization. There were also underground drainage and sanitization systems in
those cities. There was also a heterarchial society in place, and there were classes, though not a caste
system. There were no rulers, kings and monarchs in the traditional sense of the term, though
administrative classes were probably indeed present.
Seal making was a highly specialized art, and seals were made using different types of materials.
Primitive mass production technologies were also observed in the Indus. The Harappan elites also
traded extensively with the civilizations further west, and Harappan export enclaves were found further
west. Bullock carts were used for inland trade, and boats for maritime trade. The people of the Indus
civilization also achieved an impressive accuracy in measuring length, mass, and time. The people of the
Indus valley civilization are also believed to have developed an elaborate system of weights and
measures based on cubical stone weights, with a fairly high level of standardization, though differences
from region to region were also noted. These weights and measures were believed to have been used in

trade, commerce, and construction. According to the site Harappa.com, Harappan weights conformed to
a standard Harappan binary weight system that was used in almost all the settlements. The smallest
weight in this series is thought to be 0.856 grams and the most common weight weighs approximately
13.7 grams, in a 1:16 ratio. However, decimal increases were noted in case of the larger weights. Chert
weights were in multiples of 28 grams, similar to the English imperial ounce, or the Greek unia. Bricks
were in the ratio of 4:2:1. It is obvious therefore, that Harappans had some knowledge of geometry.
Harappans also developed techniques for testing the purity of gold, among other things.
Ivory rulers were also used. Harappans also were expert metalworkers, and used a wide variety of
metals such as copper, bronze, tin, silver and gold, besides other types of precious stones. Carnelian and
lapis lazuli were also used to make beads. They also produced and developed a wide variety of ceramics.
They also developed new techniques in metal working, and could even test the purity of gold.
Interestingly, they also developed polished metal mirrors, and used furnaces, kilns and hearths to attain
controlled temperatures of several hundred degrees centigrade. Raw materials were procured from
lesser cultures to the IVC such as the Ahar-Banas culture, (Ahar, Narhan, Jorwe, Kayatha cultures are
some examples of cultures that were mostly contemporaneous to the IVC) and were converted to
finished goods to be sold further west. It is even believed that the Harappans scouted south India for
gold, and travelled north of Afghanistan in search of raw materials. The Harappans also built docks and
ports such as Lotha, for trade with West Asia. They also therefore possessed knowledge of the tides and
ocean currents. Complex canal systems were also used for irrigation, along with dams. Farms were
ploughed used oxen and ploughs. Agricultural multi-cropping strategies were also used based on
seasonality. According to Gregory Possehl, the Harappans had a fairly high standard of living, even in
relation to civilizations further west.13
Post-Harappan India
Most recent research would indicate that Aryan culture in North India spread through the process of
acculturation. Even Gregory Possehl admits that civilization emerged in North India earlier than
previously and still popularly imagined. According to the Buddhist text Anguttara Nikaya, the following
sixteen Mahajanapadas were in existence before the time of Buddha i.e. 600 BC: Anga, Magadha, Kashi,
Koshala, Vajji, Malla, Vatsa, Chedi, Kuru, Panchala, Matsya, Surasena, Ashvaka, Avanti, Gandhara and
Kamboja. Another Buddhist text Digha Nikaya mentions the twelve Mahajanpadas and omits Ashvaka,
Avanti, Gandhara and Khamoboja from the list. Another Buddhist text Chulla Nidesa adds two more
Mahajanapadas Yona and Kalinga and drops Gandhara from the list. The Jaina classic The Bhagavati
Sutra gives a slightly different list of sixteen Mahajanapadas i.e., Anga, Vanga, Magadha, Malaya,
Malavaka, Accha, Vaccha, Kochcha, Padha, Ladha, Bajji or Vajji, Malla, Kasi, Kosala, Avaha and
Sambhuttara. This Jain work has obviously not considered the kingdoms of the far north, and has
included some less important kingdoms. These cultures are mostly synonymous with the Ochre
coloured pottery or OCP cultures and the PGW or painted grey ware cultures. These are often
associated with the iron age cultures of the Gangetic plains. We had also traced the origin of Brahmi in
13 Allchin, Bridget; Allchin, Raymond (1982). The Rise of Civilization in India and Pakistan. Cambridge University Press.

post-Harappan India in a previous paper, and it would be illustrative for readers to read this paper which
was written using a figure it for yourself approach.
These texts also classify these kingdoms into Aryan and non-Aryan. While Kasi was described as being an
Aryan Kingdom, Magadha, Gandhara and Anga were non-Aryan. The Buddhist texts describe the
location of these kingdoms in great detail, and a large number of these of these correspond to the large
states of Uttar Pradesh, Rajasthan, Madhya Pradesh and Bihar in North India. Gandhara and Kamboja on
the other hand correspond to present day Pakistan and Afghanistan. Some of these are also
corroborated by the Rig Veda and the Atharva Veda Let us now list out the major kingdoms and identify
the cities described in each of these kingdoms (cities are in bold letters) along with their approximate
location. Some kingdoms like Kikata (Magadha) are already described in the Rig Veda. Note that all these
cities were built over, most till the present day, unlike the cities of the Indus all of which were
abandoned and hence preserved intact for posterity.
Nonetheless, these cities may one day become the focus of archeological research as we progress to
close gaps in Indian history. While it is unlikely that post-Harappan India would have ever had the
economic conditions or the trade networks that would have produced a level of prosperity similar to
that of Harappan India, these kingdoms must nonetheless become an important area of focus for future
research. For all this interdisciplinary perspectives are required, as the literature produced in the
Gangetic plains is mostly not historical in nature, and is therefore not completely reliable by itself. Early
urbanization in the region is also suggested by Hermann Kulke, Dietmer Rothermund, Frank Raymond
Allchin, George Erdosy, Piotr Andreevich Eltsov, and others, though indeed much more research in
required. New research will also naturally unravel the economic history of the period and region. A
complete reassessment of ancient India is now required based on recent evidence. History must also
always be constructed reliably and accurately, and not with any other overt or hidden agenda.
Dr Rakesh Tewari of the UP directorate of archaeology has claimed the use of Iron in India as early as
1800 BC through excavations in the Gangetic plains in present day Uttar Pradesh. His findings were
published in the paper “The origin. of iron working in India: New evidence from the Central Ganga plain
and the Eastern Vindhyas. His date may have been slightly over-optimistic. However, it is highly likely
that Iron was imported from West Asia as contacts between the two regions began in 1700 BC per our
model. Around 600 BC, the Mahajanapadas had already begun to mint punch-marked silver coins, and
even conservative historians agree that the Mahajanapadas existed at the time of the Buddha in 600 BC.
This means that they are in fact, actually much older. . The period was marked by intensive trade activity
and urban development.
By 300 B.C., when West Asia was under the Greek Seleucid and Ptolemaic empires, the Maurya Empire
(c. 321 -185 BC) united most of the Indian subcontinent, and was one of the most impressive empires
the region had even seen. It was characterized by a complex administrative set up and internal and
external trade with neighbouring regions. It also had a well-orchestrated and a well-oiled revenue
collection system. Megasthanes’ work Indica and Kautilya’s Arthasastra are also dated to this period.
The Kushan period that followed is also associated with many inscriptions, and the percolation of arts
and crafts. The Gupta period and the Shatavahana dynasty of south India too has impressive

accomplishments. In spite of such impressive achievement, the economy of ancient India both in the
Harappan and the post-Harappan period was mostly agrarian. This is a culture and way of life that has
come to live with us, for better or for worse. This is a fundamental factor, assertion and realization that
we must use in all our economic planning endeavours, as culture may never be transformed completely
radically so quickly or easily. 14
14 Kenoyer, J.M. 1998 Ancient Cities of the Indus Valley Civilization. Oxford University Press and American Institute of Pakistan Studies, Karachi.

The Indian economy performed fairly well even just before the commencement of Islamic rule in India.
The claim of Indian pre-dominance and its subsequent decline is not based on unfounded myth.
According to Historian Angus Maddison, India’s per capita income in 1000 AD was 450 dollars compared
with 466 dollars for China and 427 dollars for Europe in the same period. India may also have been the
world’s largest economy between 1 AD and 1000 AD, according to some sources. The Mughal Empire
began in the year 1526 after the first battle of Panipat when Babur ascended the throne. The Mughal
Empire succeeded the Delhi Sultanate, the last dynasty of which was the Lodi dynasty. During the Delhi
Sultanate, the economic history of which is somewhat difficult to reconstruct owing to the paucity and
dearth of reliable sources, the economy may have flourished, and new roads and canals may have been
constructed; however, people may have been heavily taxed, and religious discrimination may have
persisted. R S Sharma also believes this period is one of relative economic stagnation and even decline,
and AL Basham believes this was a period of endemic warfare. The economy of India performed fairly
well during the Mughal period which lasted over three centuries, continuing its fairly impressive
performance during the pre-Mughal period.. Its zenith however lasted just over two centuries, and
during this zenith, India was fairly prosperous, though concerns over religious tolerance remain to this
day. The Indian economy expanded gradually during the Mughal period and India produced about 28%
of the world's industrial output by the end of the eighteenth century. This period represents a form of
proto-industrialization, but the Indian economy declined greatly during the British period.
The Mughals were responsible for building an extensive road system, creating a uniform currency, and
orchestrating the political unification of the country. The Mughals also had an extensive administrative
and revenue collection system, and collected various forms of taxes from the public by introducing new
forms of land revenue systems. By some counts the annual revenue of the Mughal empire under Akbar
was greater that that of contemporary Britain. The Mughals also adopted and standardized
the rupee which was first introduced by the Emperor Sher Shah Suri during his rule, but they imported
bullion, mostly gold and silver. The bullion stock of India at that time was around one-tenth of the entire
world. Irrigation was accorded great importance, and tanks and canals were constructed by Mughal
emperors. However, famines and droughts did occur in Mughal India, albeit at irregular intervals.
According to the historian Shireen Moosvi, in terms of contributions to the Mughal economy, in the late
sixteenth century, the primary sector contributed around 52%, the secondary sector around 18% and
the tertiary sector around 29%. Ryots and artisans also earned fairly high wages during this period, and
agricultural reforms were also instituted earlier by Sher Shah Suri and then Akbar. Indian agricultural
production increased substantially under the Mughal Empire, and different types of crops were grown,
including rice, wheat, barley, sugarcane, cotton, indigo and opium. Peppers, spices, indigo, silks,
and saltpeter were also produced. Another large manufacturing industry in the Mughal Empire
was textile manufacturing, particularly the manufacture of cotton textile, including the production
of piece goods, calicos, and muslins, sold in many different colours. The muslins of Dacca were
particularly well-known, and people as far apart as Chabadpur and Sonargaon relied on textiles for a
livelihood. Silks from Kasimbazar were sent to other parts of the country for further processing. The
cotton textile industry was responsible for a significant of the empire's international trade, and India had
a 25% share of the global textile trade in the early eighteenth century. Sericulture was practiced in

Kashmir and Bengal. Edible oils were also produced, and oil pressers flourished. Diamonds were mined
in the Chotanagpur plateau. Small industrial clusters known as kharkhanas began to emerge. Mughal
India had a large shipbuilding industry, which was largely centred in the Bengal province, with an
impressive ship building output. Women also participated in the Indian economy, both in agricultural
and non-agricultural activities. Thus, Eastern India appears to have flourished economically, along with
to some extent, the south, while the Gujarat region languished. Indian village economies also mostly
flourished, and many Indian villages were self-sufficient during this period.
Up until 1750, India produced about 25% of the world's industrial output, and manufactured goods from
India were sold in markets throughout the world. From the late seventeenth century to the early
eighteenth century, India accounted for 95% of British imports from Asia, reflecting its economic
prowess. Agricultural productivity in India during the western period was comparable to the west
according to some scholars, and most certainly higher than in British India. India during Mughal rule has
produced many legendary gems, including the Koh-i-Noor diamond, Nizam, Hope Diamond, Regent
Diamond, Great Mogul Diamond, and the Orlov Diamond, and most diamond mining
activities in Golconda in the Deccan near Hyderabad. According to Professor Angus Maddison, India had
among the world’s highest GDP during this period. However, there appears to have been a decline in
economic performance during the period of Aurangazeb, as many revolts and rebellions broke out
throughout the empire largely due to his policy of repression against the Hindus. The Mughal Empire
thereafter never regained the zenith it had attained under Emperor Akbar. After 1700, the Indian
economic went into a period of general decline, and trade and agriculture languished. The Mughal
Empire began to decline in the early eighteenth century, but particularly during the reign of Muḥammad
Shah. Much of its territory fell under the control of the Marathas and then the British after the Battle of
Plassey. The last Mughal emperor, Bahadur Shah II was an emperor in name only; he was exiled by the
British, and deposed to Rangoon, Burma where he died shortly afterward. With his death, the Mughal
Empire came to an end. 15 16 17
15 THE CAMBRIDGE ECONOMIC HISTORY OF INDIA General Editors: Dharma Kumar and Tapan Raychaudhuri Volume i: c, 1200—c. 175
16 Elliot, Sir H.M., Edited by Dowson, John. The History of India, as Told by Its Own Historians. The Muhammadan Period; published by London Trubner Company 1867–1877
17 Holden, Edward Singleton (1895). The Mogul emperors of Hindustan, A.D. 1398–A.D. 1707. New York : C. Scribner's Sons

The British began to gain rapid control over India, particularly after the Battle of Plassey, and the Battle
of Buxar. The British first administered India through the East India company’ however, following the
first Battle of Indian independence, the power was directly transferred to the British crown in 1858. The
British empire led to India's steep and terminal decline in GDP along with rapid deindustrialization, due
to active policies of the British government, and this remains a hot topic of debate and discussion
among economists, historians, and politicians. This is in spite of the fact that new technologies were
introduced during the British period include railways and ports. In sum, a lot of wealth was pilfered by
the British, and transferred out of India. Poverty increased greatly, and millions were pushed below the
poverty line. India also provided a ready market for British goods, and millions of livelihoods were
snuffed out. Indian goods were effectively banned from foreign markets due to the prevalence of high
tariffs. There were some exceptions though, as raw cotton was exported from India and imported back
to India in the form of finished goods. Therefore, India served as both a major supplier of raw goods to
British manufacturers and companies, and a large captive market for British manufactured goods. Indian
goods were no longer competitive, and Indian industry rapidly fell behind the times. Indian factory
workers moved into farms, and this pushed down agricultural wages and farm output. Artisans and
craftsmen were also discriminated against. Both urban and rural poverty increased as a result. Indians
were taxed at a very high rate. India’s relative decline in the global GDP was also on account of other
factors such as the industrial revolution in the west which largely by passed India. There are also other
apologists for the British rule in India, and some argue that the British stimulated industrial production,
and increased the area under irrigation.
The British also encouraged the Zamindari system which was a land tenure system, much to the dismay
of the local populations. Under the zamindari revenue system implemented by the British, farmers were
no longer taxed a percentage of their crops produced. Rather, they were taxed a percentage of the land
rent payments, regardless of the success or failure of the crops. The Zamindars who represented a form
of the Indian elite, collected revenue on behalf of the peasants who worked on the land, and in turn
paid them to the British. This was opposed to the more progressive ryotwari system, where farmers
were considered bonafide owners of their lands. Agricultural taxes during this period were also among
the highest in the world. At times, the British also persuaded India farmers to grow Indigo instead of
commercial cash crops, and this damaged the condition of the soil. By the end of British rule, India's
economy represented a much smaller proportion of global GDP, than it had during the onset and
commencement of the British rule. From a peak of around 25%, it fell to 2% at the time of the British
departure from India. There were also many famines during the British rule, particularly during the
Bengal region, (One of the worst famines was the Bengal famine of 1943, besides earlier famines of
1877, and 1878), and the British turned a blind eye to many of them.
A number of modern economic historians have blamed the colonial rule for the state of India's
economy, with investment in Indian industries highly limited or virtually non-existent when it was a
British colony. Under British rule, The yarn output of the handloom industry declined from 419 million
pounds in 1850 to 240 million pounds in 1900, and the quality and quality of textile exports diminished
greatly, along with handlooms, handicrafts and leather. Due to the colonial policies of the British, a
significant transfer of capital from India to England took place, leading to a massive drain of revenue and

a devastatation of the domestic economy, and a steep fall in employment. The industrial revolution and
new technologies that had transformed and metamorphosized the west, had largely bypassed India.
However, some gunpowder and ordinance factories were set up by the British government in India. The
opening of the Suez canal increased trade between the west and the orient, though it was largely to the
benefit of the west, and the detriment of the orient.
The British also set up some scientific institutions and universities which we have discussed extensively
in a previous book. There were however, some Indian industrialists who thrived, flourished and
prospered under British rule. For example, Jamshedji Tata was a great industrialist who set up Iron and
steel mills in India in the form of the Tata Iron and Steel Company in Jamshedpur in 1908. The British
however, built an extensive railway system in India. The first train ran in India in 1837, but public railway
services were opened from Bori Bunder to Thane only in 1853. Cotton and Jute industries also flourished
along with the plantation sector in south and north India, and many were controlled by Englishmen.
Arthur Cotton set up several irrigation projects in India. Mokshagundam Visvesvaraya built several
projects such as the Krishna Raja Sagara dam, and gave the clarion call to Indians to industrialize or
perish in 1898. In 1901, Dadhabhai Naoroji blamed the colonial administration for India’s backwardness
and brain drain in his book, “Poverty and Un-British rule in India.”
James Mill, (who called Indians and “Hindoos” morally degraded and primitive, lacking in any form of
economic culture and industry through the ages) and later Winston Churchill who called Indians
“primitive peoples”) were staunch defendants of the British rule in India, and the latter tried to oppose
calls for Indian independence. India was free only in 1947 after a long freedom movement and struggle
by Mahatma Gandhi, Netaji Subash Chandra Bose, and others, and the process of decolonization
unraveled worldwide only in the 1950’s, after which the British Empire became defunct. Socialism
ensured that the Indian economy stagnated at a detrimental “Hindu rate of growth”, from which it
gradually recovered only in the 1990’s. Globalization which consists of economic and non-economic
components, eventually helped power shifts out of the global west and the global north to the global
east and the global south. As per the GINI coefficient, gaps between the West and Asia have narrowed,
though laggards like Sub-Saharan Africa remain. Over the last couple of decades, a strong anti-
globalization movement has also emerged, mostly led by left-leaning thinkers, who have challenged the
tenets of globalization, and have argued against, and called into question its claimed benefits. However,
the general atmosphere in India has improved, and the country is now seen as an ascending economic
superpower. 18 19
18 Allan, J., T. Wolseley Haig, H. H. Dodwell. The Cambridge Shorter History of India (1934)
19 Bayly, Christopher Alan. Imperial Meridian: The British Empire and the World 1780–1830. (Routledge, 2016).

Chapter 5 The modern
Indian Economy before
liberalization

India’s economic policy after independence was greatly influenced and impacted by its negative colonial
experience, which was seen as exploitative by Indian nationalist leaders who therefore veered towards
autarchic economic policies, and to a much lesser extent, towards the Leninist-Stalinist model pursued
by the erstwhile USSR. They also adopted protectionism, with a strong emphasis on heavy industry,
centralized planning, economic interventionism, a large government-run public sector, and heavy
regulation of private Industry. This period also accorded the commanding heights of the Indian economy
to the public sector and state run enterprises. The five-Year Plans of India adopted by the Indian
government during this period were on the lines of central planning models followed in the Soviet
Union. Core and important sectors such as steel, mining, machine tools, telecommunications, insurance,
and power plants, among other industries, were effectively nationalised in the mid-1950s. The Indian
economy of this period is referred to as Dirigism. As per this doctrine, the state directs or sets the
direction for most sectors of the economy.
Several provincial ministers of industries under the aegis of the Indian National Congress convened on
October 1938, when the left-leaning Netaji Subash Chandra Bose was the president of the INC. Bose
then outlined his plan for the economic revival of India. To eradicate poverty and ensure speedy and
rapid economic growth, Bose said, “The problems of poverty and unemployment cannot be solved
without rapid industrialization. A comprehensive scheme of industrial development under state-
ownership and state-control will therefore be indispensable. This scheme should provide for the
development of heavy industry, medium scale industry, and cottage industry" And for this, “The
planning commission will have to consider carefully and decide which of the home industries could be
revived despite the competition of modern factories and in which sphere, large scale production should
be encouraged."
The National planning committee was also set up in the same year, i.e. 1938. The members of the
National Planning Committee included eminent stalwarts such as Sir M. Viswaswaraya, Purushottamdas
Thakurdas, Dr Meghnad Saha, Walchand Hirachand, VV Giri, and others, besides other representatives
of provincial governments. The report prepared by the NPC identified ten core and critical areas of focus
which included land, water, labour, natural resources, agriculture, industry, trade and commerce, credit
finance, and education. The Bombay Plan was another economic plan for soon to be independent India
proposed by a group of eight leading Indian industrialists namely, J. R. D. Tata, Ghanshyam Das
Birla, Ardeshir Dalal, Lala Shri Ram, Kasturbhai Lalbhai, Ardeshir Darabshaw Shroff, Sir Purshottamdas
Thakurdas and John Mathai and other technocrats in January 1944. Per this plan, a group of Indian
industrialists issued “A Plan for Economic Development”, wherein, there was a strong endorsement and
emphasis of state economic intervention and planning, and import substitution. India’s early economic
policies were also moulded and shaped by institutions such as the Indian Chamber of Commerce and
Industry set up in 1927. Another plan known as “The people’s plan for the economic development of
India”, was proposed by BN Banerjee, GD Parikh, and VM Tarkunde at around this time, and was also
mainly socialist in orientation.
This plan also called for increased growth in the agricultural and industrial sectors. Another second
edition of the plan was also subsequently published in the year 1945. The plan was criticized in some
quarters including the far left and the far right. Nehru’s policies and the first five year plan were largely

based on the Bombay plan, even though he did not endorse this plan completely. The opening decades
of the Indian economy saw the manifestation of the license raj and the inspector raj. It also saw red
tapism and bureaucracy to a high degree. This led to stifling of innovation and creatvitiy, and was heavily
criticized by many industrialists. Sardar Vallabhai Patel was right-leaning, and so was Rajagopalachari.
The latter especially criticized the license raj, as a potential source of inefficiency and corruption. Rajaji
founded the relatively politically unsuccessful Swatantra party, and Minoo Masani and NG Ranga to
oppose Nehru’s socialism, but his party never won any major electoral victory despite support from JRD
Tata and others. Then, as of now, politics, influences economics greatly. A paradigm shift was only
ushered in after 1991, when the Indian market was opened up. In 1944, Sriman Narayan Agarwal, JC
Kumarappa and others delineated “The Gandhian Plan”, based on Gandhi’s economic ideas which
emphasized the promotion of the rural economy, small unit production, and agriculture, based on
Gandhian economic ideas. Gandhi who never supported western ideals and values, also proposed the
theory of trusteeship or corporate social responsibility, according to which, the rich should act as
trustees of their property on behalf of the poor. Such ideas can however be barely considered workable.
After independence nobody mostly listened to Gandhi’s economic ideas, as he was considered to be
badly outdated. The Indian government also adopted industrial policy resolutions in 1948 and 1956.
These defined the relationship between the state and the business, and enhanced the role played by the
state in managing the affairs of the economy. The Industrial Policy Resolution of 1948, focused on the
development of basic and heavy industries, such as steel, chemicals, and machinery, in order to achieve
self-sufficiency and reduce dependence on foreign imports. The Industrial policy resolution of 1956
extended the earlier policy resolution of 1948, laid down three categories of industries and delineated
the role played by the public and private sector under each of the categories.
PC Mahalanobis who was an eminent scientist and statistician became one of the most important
architects of India's Second Five Year Plan. His ideas were mostly left-leaning in orientation.
The Mahalonobis models, or Feldman–Mahalanobis model is a Marxist model of economic
development, created independently by Soviet economist Grigory Feldman in 1928 and
Indian statistician Prasanta Chandra Mahalanobis in 1953. This model recommends a shift in the pattern
of industrial investment towards building up a domestic consumption goods sector to attain a high level
of consumption, and was back up by India’s first Prime Minister the Harrow and Cambridge-educated
Jawaharlal Nehru, who hoped it would succeed. Nehru was a believer in Fabian socialism and took
several of his ideas from the Fabian society of London; In a presidential address to the Lahore Congress
in December 1929, Nehru even stated that he was a socialist at heart. His interest in socialism was again
rekindled during the Brussels conference, and a trip to Moscow in 1927. There was also an inherent
distaste for capitalism in the aftermath of the great depression, when even the USA leaned towards
Keynesianism. Nehru even at times saw profit as a dirty word, and most of India’s early economic plans
by and large bypassed economic efficiency and industrial productivity.
The Planning Commission was an eminent planning institution set up by the Government of India on the
15th
of March 1950 under the direction of Nehru, which formulated India's Five-Year Plans for many
decades, and imparted a direction to India’s economic planning activities. The five year plans which have
now officially come to an end, set the direction for India’s socialist economy in the opening decades of

India’s independence. These were successful to varying degrees. The first plan was based largely on KN
Raj’s ideas, and the Harrod-Domar model, while the second and subsequent plans were based on PC
Mahalonobis’ ideas. The commission was dissolved by Narendra Modi several decades later, and was
replaced by a think tank NITI Aayog. The Indian economy virtually stagnated in the opening decades of
India’s independence and came to be derisively associated with the Hindu rate of growth, a term coined
by the late economist and professor at the Delhi school of economics, Raj Krishna in 1978. India’s GDP
growth rates hovered around the 3% mark for several decades, barely exceeding population growth
rates. With the exception of the first five year plan, subsequent economic plans were not particularly
successful.
India also enacted laws such as the Monopolistic and Restrictive Trade Policies or MRTP act, and the
Foreign Exchange Regulation Act or FERA.. On July 19, 1969, the Indira Gandhi government nationalised
fourteen large private commercial banks through the Banking Companies (Acquisition and Transfer of
Undertakings) Ordinance, 1969, and decided to retain more than 50 per cent of their stake. Insurance
and coal companies were also likewise nationalized by Prime Minister India Gandhi. A second round of
nationalizations of six more commercial banks followed in 1980 with the objective to give the
government more control of credit delivery. The results were mixed; however, the banking system
began to percolate and permeate gradually into rural areas, greatly benefitting the Indian economy. This
is why a detailed in depth analysis of any policy are required. We would well be advised not to ape
western models slavishly. Mindless and needless bank privatization can also be fraught with dangerous
implications as India’s planners must realize; India’s banking system is still more robust than counties
such as the USA where unitary banking is common and collapses of banks are common and relatively
widespread. There were 567 bank failures in the USA between 2001 through 2024, and this is rather
high indeed.
India also launched the Green revolution under MS Swaminathan and other scientists following the days
of the disastrous PL480 when India was living shipload to mouth and the Americans bailed India out.
India was seen as a perennial basket case, a bottomless pit, and as an American pointed out, “India
means only two things to us, famines, and Nehru.” Under the green revolution higher yielding wheat
and rice varieties were brought out particularly in the Punjab region of Northern India. We have
subsequently witnessed the white revolution or the milk revolution under the social entrepreneur
Verghese Kurien. We have also witnessed mini horticulture revolutions, sericulture revolutions, and
fodder revolutions since.
We must always bear this very vital aspect and factor in mind. Every policy decision must be
accompanied by cogitative and deep-rooted thought, and not based on ideologies or ideological
predilections. In the early 1980’s, the earliest economic reforms in India were made at the behest of the
International Monetary Fund, and were carried out by Indira Gandhi. In 1984, Rajiv Gandhi promoted
economic liberalization, and lowered tax rates to reduce tax evasion; consequently, tax receipts rose
due to this policy. Import tariffs were also reduced, and new technologies were encouraged. Export
incentives were also introduced, and industrial controls reduced. Rajiv Gandhi also promoted several
new technologies such as computers which changed the face of the Indian economy. His economic
reforms were however, seen to be slow and inconsistent by most people. By the 1980’s India was no

longer a stagnant economy, and GDP growth rates had risen by this time due to a slow but erratic
process of liberalization. Some fiscal years such as 1988 were particularly goof for the Indian economy as
agricultural output soared. Rajiv Gandhi was assassinated in May 1991. India subsequently faced a
serious balance of payments crisis which was a blessing in disguise because it led to the opening up of
the Indian economy. 20 21 22
20 Datt, Ruddar; Sundharam, K.P.M. (2009). Indian Economy. New Delhi: S. Chand Group. p. 976. ISBN 978-81-219-0298-4.
21 Drèze, John; Sen, Amartya (1996). India: Economic Development and Social Opportunity. Oxford University Press. p. 292. ISBN 978-0-19-
564082-3.
22
Journey of a nation: 75 years of the Indian economy, Sanjaya Baru

Chapter 6 The modern
Indian Economy after
liberalization

Starting in late 1990, India faced a severe balance of payments stress, and its worst since independence
in 1947. The collapse of the Soviet Union in the third quarter of 1991, following the fall of the Eastern
bloc earlier, both of which were among India's major trading partner, and the 1991 Gulf War, which
caused a spike in oil prices, exacerbated this further, and India ran the risk of defaulting on its
loans. Inward remittances also slowed down during this period. India was not only running a huge fiscal
deficit, but also had a critical balance of payments position, with foreign exchange reserves adequate to
import only a few weeks worth of goods. India asked for a bailout from the International Monetary
Fund (IMF), which in return demanded opening up of the Indian economy to international trade. At the
time, India had received very low ratings from international agencies such as Moody’s which were
downgraded even further with the passage of time. The International Monetary fund and the World
Bank suspended their assistance to India unless urgent structural reforms were initiated. The situation
had become so dire and grim, that The Chandrashekar government was even forced to mortgage gold to
finance imports.
In response to this crisis, the PV Narasimha Rao government which was elected in June 1991, (PVN
himself was some kind of a compromise candidate and Prime Ministership may have been thrust on
him) with its Finance Minister Manmohan Singh, initiated economic reforms in the second half of 1991
after realizing that the situation had become extremely grave. These reforms did away with the Licence
Raj completely, reduced tariffs to competitive levels, and ended many public monopolies, even allowing
automatic approval of foreign direct investment in most sectors, barring a few. This paved the way for
rapid economic growth in the ensuing decades, and saved India from economic collapse. The New
Economic Policy was launched in 1991 which focused on delicensing, free entry to the private sector in
most areas, disinvestment, liberalization of foreign and trade policy, encouragement to small industries,
market orientation of industry, encouragement of foreign knowhow, setting up of Foreign Investment
Promotion Board (FIPB), boosting of foreign exchange reserves, better integration with global markets,
an emphasis on bilateral and international trade, etc. The government also freed foreign exchange
regulations, gradually reforming capital and financial markets in the process.
Therefore, liberalisation, privatisation, and globalisation became the mantra of the new policy. These
reforms were however, opposed by many political parties of the time including trade unions and leftists,
who called it “a sellout to the IMF”. In retrospect, PV Nasasimha Rao and Manmohan Singh came to be
known as the father of Indian economic reforms and were lauded for their role in liberalizing India’s
economy. At first signs of economic recovery were slow to appear, but gradually, more and more people
all over the world recognized that PV Narashimha Rao and Manmohan Singh had done the right thing. It
is somewhat difficult for the millennial generation to grasp and comprehend that well until the 1980’s,
India was popularly seen as a land of snake charmers and elephants; it is also seen as a beggar nation
perpetually and perennially in short of money and cash, that could not be salvaged or rescued under any
circumstances. Its socialism was the epicenter of sloth, inefficiency, red tapism and bureaucracy, and
was used by politicians of all hues and colours for their personal gain. While India sought economic
independence after its political independence in 1947, its share of world trade fell steadily thereafter,
plummeting from 2.2 percent in 1947, to 0.45 percent in 1985, when economic reforms slowly and
gradually began to kick in. Nothing could be produced or imported without a license, and it took several

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