📈 From 1 AD To Today: A 2000-Year Story Of India's Economic Rise

Indian economy through the ages

There's a nice review of India's economic trajectory over the last two thousand years by Sanjeev Sanyal in Swarajya.

It is a tour de force of how India's economy changed over the ages and gives you a good perspective on how to think about the future.

India at #3 by 2026/27: The Indian economy (nominal GDP) is tantalizingly close to Japan's USD 4.1 trillion. And Germany is at USD 4.6 trillion. We'll beat both in the next three years.

• While this will make us the world's third largest economy, our per capita income levels will still be low.

• Nevertheless, we have to appreciate where we came from and our future economic trajectory.

The Angus Maddison estimates: During 1 AD, India's economy was pegged to be 33% of the world's (on PPP basis).

• China was at 26%, Western European (read Roman empire!) at 11%.

• This was when Roman policy-makers were complaining about the current account deficit with India. 

• By 1000 AD: India was at 29%, China at 23%, Europe after Rome had fallen to 9%, and Africa (led by Egypt) was at 12%.

The Turko-Mongol invasions and the plagues: After 1000 AD, the world's economy was stuck by two massive disruptions.

• By 1500, China's Ming Empire managed a 25% share of the global economy - India's economy had declined to 24.5% - this was when the Vijayanagar Empire held sway and large parts of the north had been conquered by Turko-Mongol invaders.

• In just 100 years, India's share declined even further - to 22.6%. Vijayanagar had been sacked, and the Mughals had disrupted large parts of the Indian economy.

• By 1600, Western Europe, led by Italy and France, contributed 20% of the global economy - thanks to the Renaissance and overseas maritime discoveries.

• Continuing decline: By 1820, while China held a share of 33% of the global economy, India was at a mere 16%. Western Europe had risen to 23.6%.

The Colonial Age - aka - the 19th Century: India had been subdued, and China was suffering from Opium and related wars.

• The West had stolen a march and contributed 33.5% of the world economy between 1870 and 1913.

• India went from 16% to a mere 8% in 1919. China, on the other hand, had it worse. They had gone from 33% in 1820 to a mere 9% in 1913.

• India and China had declined even further by 1950 - they were at 4.2% and 4.5%, respectively. From contributing nearly half the global economy to less than 10% in just two centuries!

How India, China + US Economies Evolved: The US entered the 1910s with a share of 19%, and by the end of the Second World War, it had contributed 27%.

• US' share of the global economy has been on a downward slide since then, reaching 21% in 1980.

• But in the same period (1980) India and China contributed a meagre 3% and 2.3%, respectively.

• China's turn around: 7.2% share by 2000, and by 2017, it equaled the US's share of 16%, per IMF estimates.

India's climb back: India's share is projected at 9.2% of the global economy by 2030.

• We went from just 3% in 1980 to 4.3% in 2000. By 2024, our share is projected to be 8%.

• We're already the world's third-largest economy by PPP terms.

• By 2030, we should be at 9.2% (IMF)—a little more than what we were in 1919 (Maddison estimate).

Parting shot:

"While we rightfully celebrate the recent turn of fortune, it is also important to remember that we have a long way to go before India recovers its historical place in the world."

Sanjeev Sanyal is member, Prime Minister's Economic Advisory Council (PM-EAC).