For much of recorded history, India was one of the largest economic powers in the world. This is not a cultural claim. It is supported by long term economic research.
Economic historian Angus Maddison, whose global GDP reconstructions are widely cited in academic circles, estimated that:
- Around 1 AD, India accounted for roughly 30 to 33 percent of global GDP.
- In 1000 AD, India still held around 28 percent of global output.
- In 1700, India’s share stood at approximately 24 percent, making it one of the two largest economies in the world, alongside China.
By 1950, India’s share had declined to just about 4 percent of world GDP.
This shift was not sudden. It unfolded over two centuries due to structural, technological, and political changes.
1. Pre Industrial Economic Strength
Before 1700, India’s economic dominance rested on several strong foundations.
Large Agricultural Base
India’s river systems such as the Ganga and Godavari supported high agricultural productivity. A large population meant large aggregate output.
Global Manufacturing Hub
In 1750, India accounted for about 25 percent of global manufacturing output. Indian cotton textiles from Bengal and Gujarat were exported worldwide. Indian steel and handicrafts were highly valued.
Strong Trade Networks
India was central to Indian Ocean trade routes connecting East Africa, the Middle East, Southeast Asia, and China. Ports such as Surat and Calicut were major commercial centers.
India’s wealth came from production and trade, not from isolation.
2. The Industrial Revolution in Europe
The first major structural break occurred in the late 18th century with the Industrial Revolution in Britain.
Mechanised textile production, steam engines, and factory systems dramatically increased European productivity. Output per worker in Britain began rising sharply.
India, which relied heavily on skilled artisan production, did not industrialise at the same pace. As European manufacturing expanded rapidly, India’s relative share of global output declined.
By 1820, India’s share of global GDP had dropped to about 16 percent.
The global center of economic gravity began shifting from Asia to Europe.
3. Colonial Economic Reorientation
British political control deepened India’s economic transformation.
After the Battle of Plassey in 1757, the British East India Company gained control over Bengal, one of the richest regions in the world at the time. Over the next century, British rule expanded across the subcontinent.
Under colonial administration:
- India increasingly became a supplier of raw materials such as cotton and indigo.
- British manufactured goods entered Indian markets at scale.
- Local industries faced strong competition from machine produced imports.
This led to what historians call deindustrialisation.
By 1900, India’s share of global manufacturing output had fallen to about 2 percent, down from 25 percent in 1750.
The structure of the Indian economy shifted from diversified manufacturing toward agriculture and raw material export.
4. The Per Capita Divergence
It is important to clarify that when historians describe India as the richest economy historically, they usually refer to total GDP, not per capita income.
India had a very large population. This contributed to large aggregate output. However, during the 19th century, Western economies experienced sustained increases in per capita productivity due to industrialisation.
India did not see comparable productivity growth during this period. The gap in income per person widened over time.
5. Economic Conditions at Independence
When India became independent in 1947, it inherited:
- Limited industrial infrastructure
- High poverty levels
- Weak transportation and institutional systems
In 1950, India’s share of global GDP stood at approximately 4.2 percent.
Post independence economic strategy focused on:
- State led industrial development
- Import substitution
- Heavy regulation and licensing
While this approach aimed to build domestic industry, growth remained moderate for several decades.
Major economic reforms began in 1991, liberalising trade and encouraging private investment. These reforms accelerated growth.
6. The Long Term Causes Summarised
India’s decline in global economic share was driven by interconnected structural factors:
- The Industrial Revolution created a massive productivity gap between Europe and traditional manufacturing economies.
- Colonial policies reshaped India’s economy around imperial priorities rather than indigenous industrial expansion.
- India did not industrialise at the same pace during the 19th century.
- Post independence regulatory frameworks delayed rapid integration into global markets until the 1990s.
The decline was gradual and systemic, not the result of a single event.
