INDIA AND CHINA: HISTORICAL STATISTICS

April 17, 2008 at 12:55 pm | Posted in Asia, China, Development, Economics, Financial, Globalization, History, India, Research, World-system | Leave a comment

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GDP estimates

India’s share of the world income

1800 – 1825

China was the world’s largest economy followed by India and France. The gross domestic product of India in 1825 was estimated at about 50 per cent that of China. British cotton exports reach 3 per cent of the Indian market by 1825.

1825 – 1850

China was the world’s largest economy followed by the UK and India.

An estimate by Angus Maddison, formerly of Groningen University, reveals that India’s share of the world income went from 24.4% in 1700, comparable to Europe‘s share of 23.3%, to a low of 3.8% in 1952; however, these statistics too are based on assumptions that have been criticized.[4] While Indian leaders during the Independence struggle and left-nationalist economic historians have blamed the colonial rule for the dismal state of India’s economy, a broader macroeconomic view of India during this period reveals that there were segments of both growth and decline, resulting from changes brought about by colonialism and a world that was moving towards industrialization and economic integration.

Price of Silver – Rate of Exchange: 1871-72 to 1892-93

Period

Price of Silver (in pence per Troy ounce)

Rupee exchange rate (in pence)

1871-1872

60½

23 ⅛

1875-1876

56¾

21⅝

1879-1880

51¼

20

1883-1884

50½

19½

1887-1888

44⅝

18⅞

1890-1891

47 11/16

18⅛

1891-1892

45

16¾

1892-1893

39

15

Source: B.E. Dadachanji. History of Indian Currency and Exchange, 3rd enlarged ed.

(Bombay: D.B. Taraporevala Sons & Co, 1934), p.1

The fall of the Rupee

After its victory in the Franco-Prussian War (1870-71), Germany extracted a huge indemnity from France of £200,000,000, and then moved to join Britain on a gold standard for currency. France, the U.S. and other industrializing countries followed Germany in adopting a gold standard throughout the 1870s. At the same time, other countries, such as Japan, which did not have the necessary access to gold or those, such as India, which were subject to imperial policies that determined that they did not move to a gold standard, remained mostly on a silver standard. A huge divide between silver-based and gold-based economies resulted. The worst affected were economies with a silver standard that traded mainly with economies with a gold standard. With discovery of more and more silver reserves, those currencies based on gold continued to rise in value and those based on silver were declining due to demonetization of silver. For India which carried out most of its trade with gold based countries, especially Britain, the impact of this shift was profound. As the price of silver continued to fall, so too did the exchange value of the rupee, when measured against sterling.

1775 – 1800

During this period, the East India Company began tax administration reforms in a fast expanding empire spread over 250 million acres (or 35 per cent of Indian domain). Indirect rule was also established on protectorates and buffer states. China was the world’s largest economy followed by India and France. The gross domestic product of India in 1800 was estimated at about 60 per cent that of China.

The Company treasury reported annual revenue of £111 million in circa 1800 thus registering a average annual growth of merely 0.1 per cent throughout the turbulent 18th century. Almost all of the Indian land revenues were diverted by the Company to help the British Crown defend herself in the Napoleonic Wars.

1800 – 1825

China was the world’s largest economy followed by India and France. The gross domestic product of India in 1825 was estimated at about 50 per cent that of China. British cotton exports reach 3 per cent of the Indian market by 1825.(pdf)

1825 – 1850

China was the world’s largest economy followed by the UK and India. Industrial revolution in the UK catapulted the nation to the top league of Europe for the first time ever. During this period, British foreign and economic policies began treating India as a unequal partner for the first time ever. English replaced Persian as the official language of India. The gross domestic product of India in 1850 was estimated at about 40 per cent that of China. British cotton exports reach 30 per cent of the Indian market by 1850.(pdf)

British Crown Rule

1850 – 1875

The formal dissolution of Mughal empire heralded a change in British treatment of Indian subjects. Massive railway projects were begun in earnest and government jobs and guaranteed pensions attracted a large number of upper caste Hindus into the civil service for the first time ever. China was the world’s largest economy followed by the USA, UK and India. The gross domestic product of India in 1875 was estimated at about 30 per cent that of China (or 60 per cent that of the USA). British cotton exports reach 55 per cent of the Indian market by 1875.(pdf)

1875 – 1900

USA was the world’s largest economy followed by China, UK, Germany and India. Collapse of the central authority of the Qing Dynasty and the resultant chaos triggered China’s short but rapid decline on the world stage. The gross domestic product of India in 1900 was estimated at about 20 per cent that of the USA.

The Crown treasury reported annual revenue of £122 million in circa 1900 thus registering a average annual growth of merely 0.1 per cent throughout the turbulent 19th century.

1900 – 1925

USA was the world’s largest economy followed by the UK, China, France, Germany, India and the USSR. The gross domestic product of India in 1925 was estimated at about 10 per cent that of the USA.

Zoroastrian business conglomerates like Tata and Godrej begin to dominate textile, mining and durable goods industries.

The Crown treasury reported annual revenue of £125 million in 1925 thus registering a average annual growth of merely 0.1 per cent during the turbulent first quarter of 20th century.

1925 – 1950

USA was the world’s largest economy followed by the USSR, UK, China, France, Germany and India. The gross domestic product of India in 1950 was estimated at about 7 per cent that of the USA.

The newly independent but weak Union government’s treasury reported annual revenue of £334 million in 1950 thus registering a average annual growth of almost 4 per cent during the second quarter of 20th century. In contrast, Nizam Asaf Jah VII of south India was widely reported to have amassed a fortune of almost £668 million then. [6]

Nehru Dynasty

1950 – 1975

Socialist Reforms

USA was the world’s largest economy followed by the USSR, Japan, Germany and China. The gross domestic product of India in 1975 was estimated at about 5 per cent that of the USA..

Before independence a large share of tax revenue was generated by the land tax, which was in effect a lump sum tax on land. Since then land taxes have steadily declined as a share of revenues and completely replaced by sales taxes. [1]

Moreover, the structural economic problems inherited at independence were exacerbated by the costs associated with the partition of British India, which had resulted in about 2 to 4 million refugees fleeing past each other across the new borders between India and Pakistan. The settlement of refugees was a considerable financial strain. Partition also divided India into complementary economic zones. Under the British, jute and cotton were grown in the eastern part of Bengal, the area that became East Pakistan (after 1971, Bangladesh), but processing took place mostly in the western part of Bengal, which became the Indian state of West Bengal in 1947. As a result, after independence India had to employ land previously used for food production to cultivate cotton and jute for its mills.

India’s leaders — especially the first prime minister, Jawaharlal Nehru, who introduced the five-year plans — agreed that strong economic growth and measures to increase incomes and consumption among the poorest groups were necessary goals for the new nation. Giving utmost importance to the economy, Nehru appointed R. K. Shanmukham Chetty, a person who did not participate in the mainstream Indian Independence Movement as the finance minister, since he believed that more than ideology, having the right person in the right job was important.

Government was assigned an important role in the process of alleviating poverty, and since 1951 a series of plans had guided the country’s economic development. Although there was considerable growth in the 1950s, the long-term rates of real growth were less positive than India’s politicians desired and much less than those of many other Asian countries.

Nehru’s industrial policies were intended to encourage the growth of diverse manufacturing and heavy industries, yet because of state planning, controls and regulations the result was impairment of productivity, quality and profitability. The Indian economy lumbered along with an anemic rate of growth, and chronic unemployment amidst entrenched poverty continued to plague the population.

Toward the end of Nehru’s term as prime minister, India would continue to face serious food shortages despite hoped for progress and increases in agricultural production. There was mass starvation in states like Bihar due to socialist controls on the economy. Farmers as well as industrialists were ham-strung with controls (License Raj) on their freedom to run their respective businesses. If it was not for the magnanimous and humanitarian help from the US (PL 480) the famines would have brought about starvation and death on an unimaginable scale.

Despite such atrocious conditions in the country Nehru’s popularity remained unaffected because of the larger-than-life image and the personality cult that was promoted by the state controlled mass media. In a way, this was a testament to the stoic and unshakeable Indian character and the people’s miraculous ability to endure and take into stride unimaginable difficulties.

Since 1950, India ran into trade deficits that increased in magnitude in the 1960s. The Government of India had a budget deficit problem and therefore could not borrow money from abroad or from the private sector, which itself had a negative savings rate. As a result, the government issued bonds to the RBI, which increased the money supply, leading to inflation. In 1966, foreign aid, which was hitherto a key factor in preventing devaluation of the rupee was finally cut off and India was told it had to liberalise its restrictions on trade before foreign aid would again materialise. The response was the politically unpopular step of devaluation accompanied by liberalisation. The Indo-Pakistani War of 1965 led the US and other countries friendly towards Pakistan to withdraw foreign aid to India, which further necessitated devaluation. Defence spending in 1965/1966 was 24.06% of total expenditure, the highest in the period from 1965 to 1989. This, accompanied by the drought of 1965/1966, led to a severe devaluation of the rupee.

Current GDP per capita grew 33% in the Sixties reaching a peak growth of 142% in the Seventies, decelerating sharply back to 41% in the Eighties and 20% in the Nineties.

From FY 1951 to FY 1979, the economy grew at an average rate of about 3.1 percent a year in constant prices, or at an annual rate of 1.0 percent per capita (see table 16, Appendix). During this period, industry grew at an average rate of 4.5 percent a year, compared with an annual average of 3.0 percent for agriculture. Many factors contributed to the slowdown of the economy after the mid-1960s, the main one was the socialist policies pursued by Nehru and his cabinet. They managed to tamp down on the natural business acumen and abilities of the population, yet some economists differed over the relative importance of those factors.

Structural deficiencies, such as the need for institutional changes in agriculture and the inefficiency of much of the centrally directed industrial sector, also contributed to economic stagnation. Some other excuses that were generally offered were – War with China in 1962 and with Pakistan in 1965 and 1971; a flood of refugees from East Pakistan in 1971; droughts in 1965, 1966, 1971, and 1972; currency devaluation in 1966; and the first world oil crisis, in 19731974, all jolted the economy.

This is a chart of trend of gross domestic product of India at market prices estimated by Ministry of Statistics and Programme Implementation with figures in millions of Indian Rupees. See also the IMF database.

Year

Gross Domestic Product

US Dollar Exchange[2] in (Rs.)

1950

99,340

4.79

1955

108,730

4.79

1960

171,670

4.77

1965

276,680

4.78

1970

456,770

7.56

1975

832,690

8.39

Lawrence H. Officer, “Exchange rate between the United States dollar and forty other countries, 1913 -1999.” Economic History Services, EH.Net, 2002. URL: http://eh.net/hmit/exchangerates/

The Union government treasury reported annual revenue of £5-6 billion in 1975 thus registering a average annual growth of almost 12 per cent during the third quarter of 20th century. Nevertheless, prime minister Indira proclaimed emergency and suspended the Constitution in 1975.

1975 – 2000

Privatisation Reforms

USA was the world’s largest economy followed by Japan, Germany and China. The gross domestic product of India in 2000 was estimated at about 4 per cent that of the USA.

Back-to-back assassinations of the prime ministers Indira Gandhi and her son Rajiv Gandhi crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.

As of 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default, its central bank had refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports.

The Government of India headed by Narasimha Rao decided to usher in several reforms that are collectively termed as liberalisation in the Indian media with Manmohan Singh whom he appointed as a special economical advisor. Plague returned to India in 1994.[3]

It is estimated that only 2 per cent of the population were taxpayers as of 2000. Mumbai overtook Calcutta as the largest city in the country.

This is a chart of trend of gross domestic product and foreign trade of India at market prices estimated by Ministry of Statistics and Programme Implementation with figures in millions of Indian Rupees. See also the IMF database.

Year

Gross Domestic Product

Exports

Imports

US Dollar Exchange[4] in (Rs.)

Inflation Index (2000=100)

1980

1,380,334

90,290

135,960

7.86

18

1985

2,729,350

149,510

217,540

12.36

28

1990

5,542,706

406,350

486,980

17.50

42

1995

11,571,882

1,307,330

1,449,530

32.42

69

2000

20,791,898

2,781,260

2,975,230

44.94

100

Lawrence H. Officer, “Exchange rate between the United States dollar and forty other countries, 1913 -1999.” Economic History Services, EH.Net, 2002. URL: http://eh.net/hmit/exchangerates/

During the 1990s, at least 100,000 insolvent farmers committed suicide.[5] The Union government treasury reported annual revenue of almost £19-20 billion in circa 2000 thus registering a average annual growth of merely 5 per cent during the last quarter of 20th century.

2000 – Present

Rise of Oligarchy

The gross domestic product of India in 2006 was estimated at about 7 per cent that of the USA.

National Democratic Front led by BJP, was in helm of economic affairs from 1998-2004. During this period there were two finance ministers, viz., Yashwant Sinha (1998-2003) and Jaswant Singh (2003-2004). The main economic achievement of the government was the universal license in telecom field, which allows CDMA license holders to provide GSM services and vice versa. NDA started off the Golden Quadrilateral road network connecting main metros of Delhi, Chennai, Mumbai and Kolkata. The project, still under construction, was one of the most ambitious infrastructure projects of independent India. Simultaneously, North-South and East-West highway projects were planned and construction was started.

Education for all is still an unrealised dream in India. This was made a fundamental right by amending the constitution of India and huge amount of money was pumped into the project under the name of Sarva Shiksha Abhiyan. This project met with limited success.

Currently, the economic activity in India has taken on a dynamic character which is at once, curtailed by creaky infrastructure , cumbersome justice system, dilapidated roads, severe shortages of power and electricity yet at the same time accelarated by the sheer enthusiasm and ambition of the industrialists and the populace. The upward economic cycle in India is expected in short time to effectively address the short comings and bottlenecks of the infrastructure. The fast changing, seemingly chaotic and unsettled situation is much more hopeful and reassuring than the socialist morass that was the Nehru and Indira Gandhi legacy.

This is a chart of trend of gross domestic product and foreign trade of India at market prices estimated by Ministry of Statistics and Programme Implementation with figures in millions of Indian Rupees. See also the IMF database.

Year

Gross Domestic Product

Exports

Imports

US Dollar Exchange[6] in (Rs.)

Inflation Index (2000=100)

2000

20,791,898

2,781,260

2,975,230

44.94

100

2005

34,195,278

 

 

44.09

121

Lawrence H. Officer, “Exchange rate between the United States dollar and forty other countries, 1913 -1999.” Economic History Services, EH.Net, 2002. URL: http://eh.net/hmit/exchangerates/

For purchasing power parity comparisons, the US Dollar is exchanged at 9.46 Rupees only.

Despite steady growth and continuous reforms since the Nineties, Indian economy is still mired in bureaucratic hurdles from coast to coast. This was confirmed by a World Bank report published in late 2006 ranking Pakistan (at 74th) well ahead of India (at 134th) based on ease of doing business [7]

Haphazard industrial schemes and liberalisation reforms by different governments created a massive concentration of wealth in the hands of a few select oligarchs particularly in the southern and western states of India as well as a new underclass of 50 million internally displaced persons by the end of 20th century.[8] These oligarchs control the media and the mineral resources and lobby vigorously for personal aggrandisement. In 2006, Forbes reported that India was home to more billionaires than any other nation in Asia except Russia.

Plague returned to India in 2002[9] and 2007[10]. An overwhelming 836 million people in India live on a per capita consumption of less than Rs.20 per day ($0.50 per day), according to the findings of the Arjun Sengupta report on the Conditions of Work and Promotion of Livelihood in the Unorganised Sector.[11]

The Union government treasury reported annual revenue of £51-52 billion in 2005 thus registering a average annual growth of almost 22 per cent since 2000.

It is widely believed that, as of 2006, at least 231 of the country’s 608 districts were afflicted, at differing intensities, by various insurgent and terrorist movements. [7]

References

  1. a b c d e f Khanna (2005).

  2. See Laws of Manu VIII and Chanakya‘s Arthashastra (3.1.15).

  3. a b Jataka IV.

  4. a b Haig, Bryan. 2005. “Review of ‘The World Economy: Historical Statistics,’ by Angus Maddison” Economic Record, volume 81.

  5. http://news.bbc.co.uk/2/hi/business/4337203.stm.

  6. His Fortune on TIME

  7. Almost 40% of Indian landscape is theatre of independence struggles

Bibliography

Articles

Books

Papers

News

Bibliography

  • G. Balachandran, ed. India and the World Economy, 1850-1950 Oxford University Press, 2005. ISBN 0-19-567234-8.

  • Chaudhuri, K. N.Trade and Civilisation in the Indian Ocean: An Economic History from the Rise of Islam to 1750 (1985)

  • Ludden, David, ed. New Cambridge History of India: An Agrarian History of South Asia (1999).

  • Habib, Irfan. Agrarian System of Mughal India (1963, revised edition 1999).

  • Habib, Irfan. Atlas of the Mughal Empire: Political and Economic Maps (1982).

  • Habib, Irfan. Indian Economy, 1858-1914 (2006).

  • Raychaudhuri, Tapan and Irfan Habib, eds. The Cambridge Economic History of India: Volume 1, c. 1200-c. 1750 (1982).

  • Kumar, Dharma and Meghnad Desai, eds. The Cambridge Economic History of India: Volume 2, c.1751-c.1970 (1983).

  • Tomlinson, B. R. et al.The Economy of Modern India, 1860-1970 (1996) (The New Cambridge History of India)

  • Lal, Deepak. The Hindu Equilibrium: India C.1500 B.C.-2000 A.D. (2nd ed. 2005).

  • Frankel, Francine R. India’s Political Economy, 1947-1977: The Gradual Revolution (1978).

  • Rudolph, Lloyd I. In Pursuit of Lakshmi: The Political Economy of the Indian State (1987).

  • Roy, Tirthankar. The Economic History of India 1857-1947 (2002, 2006).

  • Larue, C. Steven. The India Handbook (1997) (Regional Handbooks of Economic Development).

  • Das, Gurcharan. India Unbound: The Social and Economic Revolution from Independence to the Global Information Age (2002).

GDP estimates

India’s share of the world income

1800 – 1825

China was the world’s largest economy followed by India and France. The gross domestic product of India in 1825 was estimated at about 50 per cent that of China. British cotton exports reach 3 per cent of the Indian market by 1825.

1825 – 1850

China was the world’s largest economy followed by the UK and India.

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