Another GDP debate: Decoding the truth behind India's ancient economic glory

ET will periodically analyse debatable or dubious claims that catch public attention and try to bring clarity and order in what often become fact-free free-for-alls.

CLAIM
India used to be the world’s largest economy back in ancient times, and that happened in the era of ‘Hindu kingdoms’, that is, before the ‘Muslim rulers’ invasion.

WHO MAKES IT?
Various figures on the Hindu Right.


IS IT A FACT
Not entirely wrong and not entirely right, and the causality is wrong.

WHY?
Tonnes of research by economic historians come to these broad conclusions, although debate over specifics continue. ET summarises the research.

ARGUMENTS
1. Starting from 1 AD and for a long time after that, India and China were the world’s largest and second largest economies. But that was mostly because, in the absence of technology-led productivity jumps, population determined total GDP. India and China were the most populated countries. Note also, per capita income in ancient times was low everywhere, because output was basically a function of the size of the labour force.

2. In 1500, China and India were still the largest economies. Some historians say China was slightly ahead. Both are estimated to have GDP of around $100 billion, PPP terms, with US dollar taken at its 2015 value. Around this time, the Delhi Sultanate was in its last period of reign, there were Hindu kingdoms too, and Vasco Da Gama had visited India, an early indication of European colonialism to come later.

3. In 1700, India, most of it under Mughal rule, is said to have pulled ahead of China again.

4. But China was making better use of agricultural technology and by early 19th century, India was the second-largest, but its GDP was just over half of China’s.

5. India never resumed lead position again. Industrial revolution made the West pull ahead. The US became the largest economy in 1890, and remains till today. And British colonialism took its toll on India’s economy. So, although for much of the time India was under British rule, its GDP was larger than Britain’s, but Britain had far larger per capita income. In 1870, for example, Britain’s per capita income was 6 times higher than India’s.

6. Tragically, post-Independence, India made it worse for itself by choosing state socialism. And China went Communist. The socialist/communist period saw both countries slipping down the ranks. India’s was the ninth-largest economy in 1980, followed by Communist China’s at 10th.

7. But then Deng Xiaoping yanked China out of collectivism. China raced ahead of India, and remains far ahead even now. India’s catch-up started in 1991.

8. Now, in PPP terms, India’s GDP ranks behind China’s and the US’. But in per capita income, India ranks much more poorly.

CONCLUSION
It’s historically meaningless to ascribe India’s ancient, Middle Ages and pre-industrial revolution periods’ top GDP rankings to either ‘Hindu’ or ‘Muslim’ rule. It was a function of India’s high population. And, note that it will have taken 550 years (1500 to 2050) for China and India to lead the world in GDP terms again. But it’s very unlikely India will assume number one position in foreseeable future.