The Economic History of India from the Paleolithic Period to 1200 CE
Taking into account the importance of understanding the Indian economy, knowledge of its history is essential. This chapter attempts to discuss the history of the Indian economy in ancient times. India is one of the oldest civilizations in the world, and its economic history is at least 5,000 years old, dating back to the Indus Valley Civilization (DeFrain and Asay 2012). Ancient India was a rich country until foreigners plundered it for several hundred years. But it has a history of a great economy due to its trade relations with foreign countries ranging from those in the Far East to Western Europe and Africa.1
The earliest periods of Indian history are known only through reconstructions from archaeological evidence. Since the late 20th century, much new data has emerged, allowing a far fuller reconstruction than was formerly possible. Because of availability of this new data it is easier to frame the analysis into the following five major periods (Encyclopedia Britannica):
- I.The early prehistoric period (before the 8th millennium BCE)
- II.The period of the prehistoric agriculturalists and pastoralists (approximately the 8th to the mid-4th millennium BCE)
- III.The Early Indus, or Early Harappan, Period (so named for the excavated city of Harappa in Eastern Pakistan), witnessing the emergence of the first cities in the Indus River system (c. 3500 to 2600 BCE)
- IV.The Indus, or Harappan, Civilization (c. 2600 to 2000 BCE, or perhaps ending as late as 1750 BCE)
- V.The Posturban Period, which follows the Indus Civilization and precedes the rise of cities in Northern India during the second quarter of the 1st millennium BCE (c. 1750 to 750 BCE)
The economy of a society is one of the most important factors in determining its progress. The Indus Valley people had developed a prosperous civilization on the basis of a thriving agricultural economy. It is interesting to note that the economic history of India begins with the Indus Valley Civilization (3300 to 1300 BCE), whose economy appears to have depended significantly on trade, most notably Indus–Mesopotamia trade relations. The Vedic Period, or Vedic Age (1500 to 500 BCE), is the period in the history of the Northern Indian subcontinent between the end of the urban Indus Valley Civilization and a second urbanization that began in the central Indo-Gangetic Plain (c. 600 BCE). During 1750–500 BCE Indo-Aryans settled into northern India, bringing with them specific religious traditions. Vedic society was patriarchal and patrilineal. The period saw countable units of precious metal being used for exchange.
The people were rural and agricultural. They domesticated animals like the cow, sheep, goat, ass, ox, and dog. People’s wealth was known in terms of cattle rearing. Domestication of animals was a useful profession. People domesticated animals and birds for the purpose of milk, meat, and pleasure. Rig Vedic Indians (1500 to 500 BCE) also resorted to hunting for a livelihood. Mining was another important occupation, although the Aryans had not discovered iron during the Rig Vedic period. They had trade relations between themselves in the expanded lands formed by their migrations very early in their history. They produced wheat, barley, millet and a variety of fruits. The carpenter, the weaver, the potter, the goldsmith, the jeweler, the physician, and the house builder represented some other professions of this society. In the Later Vedic Period (1000 to 600 BCE), the economic life of the Aryans was well advanced and prosperous. The growth of cities was the best proof of this. Agriculture was still their main occupation, though. Cattle rearing was another important occupation. People were organized into guilds and had more extensive knowledge of different kinds of metals. Besides gold and copper, they also used silver and iron.
Then came the period of various empires in India, including the Gupta and the Mauryan Empires (325 to 185 BCE). India during the Mauryan period inevitably brings reference to the great king Ashoka. The Mauryan dynasty existed between the 4th and 3rd centuries BCE and unified the subcontinent for the first time and also contributed to the spread of Buddhism.
The Mauryan Empire brought large areas of land under cultivation. Land revenue was recognized as an important source of income. Assessment of land also took place at regular intervals. One-fourth of the national income was spent on public works and the salaries of the large staff. Public works included road construction, irrigation, rest house construction, and army maintenance. Iron was widely used. During excavations different types of iron tools like socketed axes, sickles, and possibly plowshares have been found. These tools must have made the task of clearing the thick forests of the Eastern Ganges plains easy. Additionally, these tools facilitated the efficiency of agriculture. Numerous small heaps of iron slogs have been found scattered all over the iron belt of South Bihar (Encyclopedia Britannica). Mauryan India had numerous private commercial entities. These existed purely for private commerce and developed before the Mauryan Empire itself.
The Gupta Empire existed from the mid-to-late 3rd century to 543 CE. It covered much of the Indian subcontinent. This period is considered the Golden Age of India by some historians. The most notable rulers of this dynasty were Chandragupta I, Samudragupta, and Chandragupta II (or Vikramaditya). The 5th century Sanskrit poet Kalidasa credits the Guptas with having conquered about 21 kingdoms, both in and outside India. Education played an important role in the Gupta Period. During the Gupta, period agriculture formed a significant part of the empire’s economy. However, the trade and commerce activities of the Gupta Empire grew steadily. The merchant and other traders were organized into guilds. These guilds were given concessions in the taxes that were liable to be paid to the government.2 During this era, primary education was obtained by the people. To obtain formal and higher education, people had to stay in Brahmanical Agraharas3or Buddhist monasteries.4
Trends in early Indian society: A considerable change is noticeable during this period in the role of institutions. Clan-based societies had assemblies, whose political role changed with the transformation of tribe into state and with oligarchic and monarchical governments. Centralized imperialism, which was attempted under the Mauryan Empire (325 to 185 BCE), gave way gradually to a decentralized administration and to what has been called a “feudalistic pattern” in the post-Gupta Period, that is, from the 7th century CE. Although the village as an administrative and social unit remained constant, its relationship with the mainstream of history varied. The pendulum of politics swung from large to small kingdoms, with the former attempting to establish empires—the sole successful attempt being that of the Mauryan dynasty. Thus, true centralization was rare, because local forces often determined historical events. These small kingdoms also often boasted the most elaborate and impressive monuments.
The major economic patterns related to land and to commerce. The transition from tribal to peasant society was a continuing process, with the gradual clearing of wasteland and the expansion of the village economy based on plow agriculture. Recognition of the importance of land revenue coincided with the emergence of the imperial system in the 4th century BCE, and from this period onward, although the imperial structure did not last long, land revenue became central to the administration and the income of the state. Frequent mentions of individual ownership, references to crown lands, numerous land grants to religious and secular grantees in the post-Gupta Period, and detailed discussions in legal sources of the rights of purchase, bequest, and sale of land all clearly indicate that private ownership of land existed. Much emphasis has been laid on the state control of the irrigation system; yet, a systematic study of irrigation in India reveals that it was generally privately controlled and serviced small areas of land. When the state built canals, they were mainly in the areas affected by both the winter and summer monsoons. Here, village assemblies played a dominant part in revenue and general administration, as in the Chola Kingdom of Southern India.
The urban economy was crucial to the rise of civilization in the Indus Valley (c. 2600 to 2000 BCE). Later, the 1st millennium BCE saw an urban civilization in the Ganges (Ganga) Valley and still later in coastal South India. The emergence of towns was based on administrative needs, the requirements of trade, and pilgrimage centers. In the 1st millennium CE, when commerce expanded to include trade with Western Asia, the Eastern Mediterranean, and Central and Southeast Asia, revenue from trade contributed substantially to the economies of the participating kingdoms.
“Gold coins were issued for the first time by the Kushan dynasty (95 to 127 CE), and in large quantities by the Guptas. Both kingdoms were active in foreign trade. Gold was imported from Central Asia and the Roman Republic and Empire and later perhaps from Eastern Africa because, in spite of India’s recurring association with gold, its sources were limited. Expanding trade encouraged the opening up of new routes, and this, coupled with the expanding village economy, led to a marked increase of knowledge about the subcontinent during the post-Mauryan period. With increasing trade, guilds became more powerful in the towns. Members of the guilds participated in the administration, were associated with politics, and controlled the development of trade through merchant embassies sent to places as far afield as Rome and China. Not least, guilds and merchant associations held envied and respectable positions as donors of religious institutions” (Encyclopedia Britannica).
Classical economic thoughts of India are based on the ideas of the Vedas, the Upanishads, the Epics, and so on. During the reign of Chandragupta, that is, in 300 BCE, Kautilya wrote a valuable book on economics titled Arthashastra (Kautilya (also known as Chanakya) was an Indian statesman and philosopher, chief advisor and Prime Minister of Emperor Chandragupta). The Arthashastra has continued to inspire nationalist economic historiography. Indian philosophers during ancient times stressed greatly on the equal distribution of produced commodities among the masses.
Sharma (2011) has pointed out as many as seven stages of the ancient Indian economy: (i) Harappan, (ii) Rg Vedic, (iii) Later Vedic, (iv) the period of c. 500 to 322 BC, (v) Mauryan, (vi) post-Mauryan (200 BC to 200 AD) and (vii) Gupta. He also touched upon the various modes of production, North Indian economic life during the Gupta Period, eight economic aspects of the caste system, the early medieval land grants, the peasant protest in early medieval India, usury in early medieval times, different aspects of urbanism along with urban growth and decline in early historic India.
Sharma (2011) dealt with the origins of Indian feudalism (300 to 750 AD) and studied the feudal polity and economy under the Palas, Pratiharas, and Rastrakutas (750 to 1000 AD), as well as during the two centuries preceding the establishment of the Sultanate (1000 to 1200 AD). According to Sharma, feudalism in India, unlike in Europe, began with the land grants made to learned “brahmanas” (the utterance of a priest, or Brahman. More commonly, it is used to refer to the explanation and meaning of a sacred word), temples, and monasteries, for which the epigraphic evidence begins from the 1st century AD and multiplies by the Gupta times, when villages together with their fields and inhabitants; fiscal, administrative, and judicial rights (with the right to enjoy fines received); and exemption from the interference of royal officials were given to religious beneficiaries. What was abandoned step by step to the priestly class was later given to the warrior class. Sharma (2011) postulates the existence of serfdom in Gujarat, Madhya Pradesh, Kangra, Andhra, Orissa, and Bengal during the 6th and 7th centuries on the basis of epigraphic references to the transfer of individual peasants and laborers together with the donated land. The crucial passage, in his opinion, indicates the general emergence of serfdom.
Before concluding, it is worthwhile to go through a recent research work that very elaborately analyzed the economic history of India. Deodhar (2018) “takes a comprehensive perspective on Indian economic thought leading up to Kautilya, highlighting the broader spread of economic writings prior to Kautilya as also the political economy aspects espoused by Kautilya. Thoughts on economic matters were being written in ancient Indian literature as much as the otherworldly concerns. Some of this literature, composed mostly in Sanskrit, spanned beyond a couple of millennia BCE.” For example, “the Rig Veda, one of the premier religious texts originating in India, dates back at least to 1500 BCE (Violatti 2013). In fact, there are four different kinds of Vedas and most were orally composed in the third millennia BCE.
The Arthashastra was written as a treatise for ideal functioning of the economy, state administration, and the conduct of the ruler. Kautilya also refers to a few earlier texts from where he had improvised some of the ideas in his treatise. “Prior to the Sarasvati–Sindu epoch (2300 to 1700 BCE) and thereafter, India has had a continuous and uninterrupted existence of social, religious, and economic life, a phenomenon that finds few parallels elsewhere. While the world population was about 100 million in 1000 BCE, three-fifths of it lived in Asia, with an overwhelming number in the Indian subcontinent itself. Angus Maddison’s (2003) work shows that by the 1st millennium CE, India’s GDP was about one-third to half of the total world GDP. The Golden Age of India reached its peak during the Gupta dynasty (c. 6th century)” (Deodhar 2018).
The narrations of economic statements emanating from ancient Indian texts are all about worldly concerns, in contrast to the perceptions that Indians were preoccupied only with otherworldly concerns. The narration include aspects such as the pursuit of material well-being, keeping a balance between baser and otherworldly objectives, cognizance of charity as an instrument to address market failure, prudence in collection and use of taxes, bargaining, and ‘verna’5 as a means of division of labor and distributive justice. Moreover, Narada’s6 counsel to the king suggests that the grasp of economic policies of the state was also taking shape over the centuries during the 1st millennia BCE. The ideas seem to have been further developed, integrated, and presented with a definite purpose in the 4th century BCE by Kautilya in his Arthashastra (Deodhar 2018).
“The history of Indian economic thoughts goes back to Vedas, which were first composed at least three millennia ago. The expressions of early economic thoughts were grounded in the sociocultural and material environment that existed then. Though disjoint and scattered in different texts, these thoughts were profound and did get collated and improvised over the centuries. If the Sanskrit grammarian Panini came up with the nomenclature for compound interest in circa 700 BCE, it was Kautilya who understood the relation between interest rates and risk and uncertainty. In contrast, the Western world had looked down upon interest as usury until a millennium after Kautilya’s treatise” Deodhar (2018). Deodhar (2018) quotes numerous verses on economics from ancient Indian texts. He also quotes various verses on how poverty was considered a bad state to be in. The original varna system, which degenerated into the present caste system, was invented for the division of labor. Clearly, the division of people among the four varnas—Brahmin, Kshatriya, Vaishaya, and Shudra, that is, the knowledge seeker, warrior, tradesman, and artisan/cultivator—was based on guna-karma (aptitude driven vocation) and not birth.
Kautilya could be considered the first preclassical economist, who in his Arthashastra laid down the institutional rules and regulations for the smooth functioning of the political economy exemplifying the pragmatic application of modern economics principles.
Deodhar (2018) blames foreign invasions and the British rule for scant attention paid to the history of Indian economic thought. Ancient Indian economic thought has its origins in the Vedic age. The preclassical economic thoughts that appeared in the Vedas, dating a millennium prior to the Greek writings, culminated in their comprehensive coverage in the Arthashastra, but have remained largely unnoticed. The minute details of economic principles are laid down in the Arthashastra.
Thapar (2002) has observed that, “in the immediate post-Gupta Period commercial activity in some parts of Northern India appears to have declined”. “Declining trade in certain areas could well have been a cause. Towns became deserted when trade routes changed course and the location of markets shifted.” “Urban decline could have been caused by less availability of produce for exchange. This usually consisted of manufactured items or agricultural produce such as sugarcane, cotton, and indigo, which also served rural markets. Trade would have shifted to other areas, with new towns replacing the older ones. Ports and coastal towns appear to have been less affected by the commercial decline.”
“Cargoes were of goods either produced in India or brought by Indian merchants from further east. Of the items imported, silk and porcelain came from China, while China imported cotton textiles, ivory, rhinoceros horn, and a variety of precious and semiprecious stones from India. The exports westwards continued to be substantially pepper and other spices, and textiles. Mention of improved technologies in the production of cotton probably register its importance in commerce. Merchants from West Asia and the Eastern Mediterranean settled along the west coast, participating in the Indian trade with the West, and encroaching on the Eastern trade as well. Arab merchants strove to replace Indian middlemen in the trade between India, Southeast Asia, and China by going directly to these places. The North Indian overland trade with Central Asia met with vicissitudes owing to the movements of peoples such as the Turks and the Mongols” (Thapar 2002).
- 1.Economic History of India. https://www.mapsofindia.com/history/economic.html, (accessed on February 6, 2020).
- 2.Gupta empire economy. http://theindianhistory.org/Gupta/gupta-empire-economy.html, (accessed on December 19, 2019).
- 3.Agrahara was a teacher who taught courses. “An agrahara was a wider institution, a whole settlement of learned brahmans, with its own powers of government and means of maintenance granted by generous donars. The agraharas were governed by its sabha, some of whose proceedings are recorded in inscriptions”. Mookerji, Radha Kumad 2016. Ancient Indian Education: Brahmanical and Buddhist, Motilal Banarsidass; 8th edition, New Delhi.
- 4.A monastery is a community of men or women (monks or nuns), who have chosen to withdraw from society, forming a new community devoted to religious practice. The monastery typically becomes the spiritual focus of the nearest town or village, but far enough away so as not to be disturbed during meditation.
Buddhist Monasteries https://www.khanacademy.org/humanities/art-asia/beginners-guide-asianculture/buddhist-art-culture/a/buddhist-monasteries, (accessed on December 19, 2019). - 5.Varna’ defines the hereditary roots of a newborn, it indicates the colour, type, order or class of people. Four principal categories are defined: Brahmins (priests, gurus, etc.), Kshatriyas (warriors, kings, administrators, etc.), Vaishyas (agriculturalists, traders, etc., also called Vysyas), and Shudras (labourers). Each Varna propounds specific life principles to follow; newborns are required to follow the customs, rules, conduct, and beliefs fundamental to their respective Varnas.
Caste System in Ancient India https://www.ancient.eu/article/1152/caste-system-in-ancient-india/, (accessed on December 19, 2019). - 6.Narada is a Vedic sage, famous in Hindu traditions as a traveling musician and storyteller, who carries news and enlightening wisdom.