By Khushi Poddar
Hunting and gathering. Survival of the fittest. All these depict the old stone age. Where there was almost no trade, no economics, no welfare. Fire was man’s only invention and best friend. Man lived in caves, continuously moving in search of food.
Then took place the Agricultural Revolution, where man discovered that a seed could be dug in the earth to grow a plant. Thus caves turned into villages, and farms were established to feed the population. Now is when the layman had the economic thought, ”What if I don’t want to hunt or farm? What if I’m better at building tools?”
This economic thought is what in the modern world is termed as ‘specialization’. A new economic activity was thus added, and food would now be exchanged for tools, goods, and services. This is how the ‘Barter System’ laid its roots.
Meanwhile, the second agricultural revolution happened, where people gradually and slowly learnt about science and maths and applied it in agriculture. This led to a generation of ‘surplus’ of food. Now came in the concepts of trade, both internal and external. Villages turned into cities. There was growth and development in every sphere.
Until now, the entire world economy was majorly agriculture based and labour-intensive. When industrial revolution occurred, people realised that machines and capital could replace humans in many fields. Surplus, trade and commerce. Now several economic reforms later, we are a global market living in the ‘information age’, where even ideas are sent across the world.
Digging deeper into The Indian Economics specifically
It all started with the Indus Valley Civilisation that replaced the barter system with the use of ‘stone seals’. Trade and commerce flourished, facilitated by advances in transport.
The first ‘coin’ in India, however, was a silver punch-marked one, minted by The Mahajanapadas. The Indian subcontinent flourished under the Mauryan and the Mughal rules, contributing to one-third to one-fourth of the world’s wealth, giving summon to ‘India’s Golden Age’.
Two hundred years of British rule literally converted India from a wealth abundant, exporting country contributing to about 26% of the world’s wealth to a wealth scarce, importing country accounting for only 3% of the world’s wealth.
Ironically enough, when taking a look at India’s pre-colonial economy the annual revenue of Emperor Akbar’s treasury comes to an estimated £17.5 million, whereas, the entire treasury of Great Britain even two hundred years later totalled only £16 million.
Read More: Why Do Countries With Ample Natural Resources Grow Slower Than Those With Feeble Natural Resources?
India After Independence
1950 marked the beginning of India’s rebuilding process. For the first few years, even though India opted for centralised Five-year plans, the economy grew at an average pace of 3.1 percent a year at constant prices, until 1979.
This was largely due to lack of capital formation, defence expenditure and cold war politics. A closed economy then, its ‘protectionism’ was actually causing harm at home.
India realised that pumping in money would help. Increase in private savings and investment and borrowing from foreign sources led to higher economic growth.
As private savings were already at a high level and couldn’t be increased further, in the mid-1980s India relied heavily on borrowing from foreign sources.
This led to a balance of payments crisis in 1990. In order to receive new loans, the government had no choice but to adhere to economic reform measures of Liberalization, Privatization and Globalisation (LPG).
Which was once a predominantly agrarian economy (59% in 1951), has now become a manufacturing ‘hub’ and its service sector is doing so well that it is known as ‘the back office of the world’.
This does not in the least mean that it is lagging behind in the domain of science and technology, it ranks third among the most attractive investment destinations for technology transactions in the world.
One of the largest and fastest growing economies, India is here to claim back its economic position.
Image Credits: Google Images