India GDP

More than sixty years ago, in the summer of 1948, the Indian nation, then
newly-born, was struggling for its very survival. It was pierced from the left
by the Communists, and pinched from the right by Hindu extremists. And
there were other problems aplenty. Eight million refugees had to be
resettled; provided with land, homes, employment and a sense of citizenship.
Five hundred princely states had to be integrated, one by one, a process that
involved much massaging of egos (for the Maharajas tended to think very
highly of themselves), and just a little coercion. Few Indians now alive know
how uncertain our future looked in the summer of 1948. The question then
being asked everywhere was Will India Survive?. Now, sixty-four years down
the road, that fearful query has been replaced by a far more hopeful one,
namely, Will India Become a Superpower?.
This new, anticipatory, expectant question has been prompted by the
extraordinary resilience, in the long term, of Indias democratic institutions.
When the first General Elections were held, in 1952, they were dubbed the
Biggest Gamble in History. Never before had universal adult franchise been
tried in a poor, divided, and largely illiterate society. Evidently, it is a gamble
that has worked. The country has successfully held fifteen General Elections
to the national Parliament, as well as countless polls to different state
assemblies. Rates of voter participation are often higher than in Western
democracies. And after what happened in Florida in 2000, we can add that
the conduct of polls is at least as fair. Back in 1948, doubts were also being
cast about the Indian experiment with nationhood. Never before had a new
nation not based its unity on a single language, religion, or common enemy.
As an inclusive, plural, and non-adversarial model of nationalism, the idea of
India had no precedent or imitator.

In the words of the political theorist Sunil Khilnani, India has been a
substantial bridgehead of effervescent liberty on the Asian continent. As
such, it inspires hope that the largely poor, still divided, and formerly
colonized countries of Africa and the Middle East can likewise move towards
a more democratic political system. Meanwhile, through its collective coexistence of different faiths, languages, cultures, and cuisines, India is a
better model for world governance than more homogeneous countries such
as China, Japan, or the United States. Once, the heterogeneity of India was
seen as its greatest fl aw; now, it may justly be celebrated as its greatest
strength.

India a Raising Super power

On July 1st 2015, according to data released by the World Bank in
Washington. Indias GDP crossed the $2-trillion mark in 2014 with national
income per person rose to $1,610 (around Rs. 1 lakh) a year during 2014
from $1,560 the previous year. Indias growth rate, at 7.4 per cent in 2014,
makes it the fastest growing major economy along with Chinas, which is a
whopping $10.4 trillion in size. The Indian economy, at $2.06 trillion, has
almost doubled in size since the financial crisis hit the country in 2008, and
has more than quadrupled from the start of this millennium.

Draconian Death of Indias GDP

During the pre-colonial rule of the Mughal India had its golden age of
prosperity, and this fabulous wealth set the Europeans on their great
voyages of discovery. During the Mughal Empire at the end of the 16th
century, India's wealth did indeed sustain more than 100 million people. With
plenty of arable land, its agriculture was certainly as productive as Western
Europe's, and even the subsistence-oriented peasant got a decent return.9
India also had a large, skilled workforce that produced not only cotton but
also luxuries for the aristocracy. Consequently, the economy produced a
large financial surplus, which was used to support the growing Mughal
Empire and finance spectacular monuments like the Taj Mahal.The industrial
revolution came along, followed by the information revolution, mere size
mattered less. First the Europeans, then the Americans leveraged technology
to blow out GDP on a per capita basis. Steam engine, internal combustion
engine, silicon makes up for size.
In 1497, the Portuguese sent Vasco da Gama with a flotilla of four ships to
find India's wealth. But the two-year voyage was not a commercial success
and the Indians were not interested in European clothes and goods for they
made far ones in India. But Vasco Da Gama told King Manuel of Portugal of
large cities, large buildings and rivers, and great populations. He spoke about

spices and jewels, precious stones and mines of gold. He believed that he
had found India's legendary wealth.
It took the English a hundred years to discover this wealth. Initially, they
came to plunder but soon discovered the rewards of trade. They found that
India produced the world's best cotton yarn and textiles and in enormous
quantities. What the Indians wanted in exchange from the Europeans was
gold and silver, for which they had an insatiable appetite. Hence, there was a
constant flow of gold to India, which absorbed a good deal of the bullion
mined by the Spaniards in the New World. Since gold is an unproductive
metal apart from its ornamental quality, the Indians traded the life giving
spicies, clothes and rice for non growing commodity. Having learned about
cotton textiles from India, the English turned the tables, and brought an
industrial revolution to Britain, but destroyed the lives of millions of Indian
weavers.
India was a leading manufacturing country in the world in the early 18th
century. It had 22.6 percent share of the world's GDP, which came down to
around 16 percent by 1820, closer to its share of world population.13 It had a
developed banking system and vigorous merchant capital, with a network of
agents, brokers and middlemen. Given the enormous financial surplus, a
skilled artisan class, large exports, plenty of arable land and reasonable
productivity, the question is why didn't a modern industrial economy emerge
in India? Instead, why did India become impoverished?
Despite a dynamic and a growing commercial sector which
responded to market forces and extensive foreign trade, the truth is
that 18th century India was significantly behind Western Europe in
technology, institutions and ideas. Neither an agricultural
revolution, nor a scientific revolution had occurred, and in the long
run the manual skill of the Indian artisan could be no substitute for
technological progress, and this would have needed new attitudes.
Notwithstanding the surplus and the trade, mid-eighteenth India
had a per capita product perhaps two-thirds of that in England and
France.
There is no easy answer to the problem that the country was prosperous and
the people were poor. One explanation is that even in the 18th century India
had a large population and plenty of cheap labor. Prosperity comes with
rising productivity and a rise in productivity depends on technology. When

the supply of labor is elastic, it is more economical to hire people than to

invest in machines. Hence, an Englishman observed in 1807, In India it is
seldom that an attempt is made to accomplish anything by machinery that
can be performed by human labour. Since India had less of technology
based manufacturing and excess surplus of human resources the Britishers
wanted to use this opportunity which is shown in the diagram below.

As the supply of the labour increased, the manufacturing of products

increased in India, ideally this should have increased the GDP of India as it
was in the Moghul period. Ironically the products produced in India were
shipped to the western world. East India Company paid a trade off to kings of
the princely state, nothing comparable to the quantity of the wealth looted
from India. As shown in the below graph, there was a huge demand for the
products manufactured in India which increased the quantity demanded. This
made the East India Company to set up their bases and create
manufacturing units in India.

India had been rich before the British came and colonialism weakened
agriculture and deindustrialized India, throwing millions of artisans out of
work. Britain's trade policies encouraged the import of manufactures and the
export of raw materials; finally, it drained the wealth of India by transferring
its capital to Britain.
Nationalists claimed that Lancashire's new textile mills crushed India's
handloom textile industry and threw millions of weavers out of work. India's
textile exports plunged from a leadership position before the start of the
Britain's Industrial Revolution to a fraction. The indigenous banking system,
which financed these exports, was also destroyed. Since the colonial
government did not erect tariff barriers, Indian consumers shifted to cheaper
English mill-made cloth and millions of handloom workers where left in
misery. British colonial rule de-industrialised India (a favorite nationalist
phrase) and from an exporter of textiles, India became an exporter of raw
cotton.17
Britain also changed the old land revenue system to the disadvantage of the
farmer, who had to now pay revenue whether or not the monsoon failed. This

led to famines. The worst one in 1896-97 affected 96 million lives and killed
an estimated 5 million people. Although the railways helped in the trade of
food crops, the enlarged national market sucked away the peasant's surplus,
which he had earlier stored for the bad years. Moreover, the British
government transferred its surplus revenues back to England. Since India
consistently exported more then she imported in the second half of the 19th
century and early 20th century, Britain used India's trade surplus to finance
her own trade deficit with the rest of the world, to pay for her exports to
India, and for capital repayments in London. This represented a massive
drain of India's wealth.
The machines of Britain's industrial revolution wiped out Indian textiles, in
the same way that traditional handmade textiles disappeared in Europe and
the rest of the world. Fifty years later Indian textile mills would have
destroyed them. India's weavers were, thus, the victims of technological
obsolescence.
They also found that the land tax had not been exorbitantby 1900 it was
only 5 percent of the agricultural output or half the average per capita tax
burden. There had been a drain of wealth, but it was only about 1.5
percent of GNP every year. The revisionist historians argued that India's
payments to Britain were for real military and civilian services and to service
capital investments. Also, the overhead cost of the British establishment
the so called home chargeswas in fact quite small.20 If India had its own
army and navy it would have spent more. True, India did have a balance of
payments surplus, which Britain used to finance part of her deficit, but India
was compensated by the import of gold and silver that went into private
Indian hands.

India begins to re-industrize

Indian entrepreneurs began to set up their own modern textile mills after
1850 and very slowly began to recapture the domestic market. In 1896,
Indian mills supplied 8% of the total cloth consumed in India; in 1913, 20%;
in 1936, 62%; and by 1945, 76%.21 Although India did not participate in
global trade expansion between 1870 and 1913, Indian businessmen made
large profits during the First World War, which they reinvested in after the
war. Thus, India's manufacturing output grew 5.6 percent per year between
1913-38, well above the world average of 3.3 percent. 22 The British
government finally provided tariff protection from the 1920s, which helped
industrialists to expand and diversify.

By Independence in 1947, Indian entrepreneurs were strong and in a position

to buy out the businesses of the departing British. Industry's share in India's
GNP had doubled from 3.8 percent (in 1913) to 7.5 percent (in 1947), and the
share of manufactures in her exports rose from 22.4 percent (in 1913) to 30
percent (in 1947).