Political Systems

describe the process by which

decisions are made
determine who chooses the leaders of
the country
the process by which laws are made
how much control do people have and
checks and balances in terms of power

Economic Systems
describe how goods (services and
products) are produced and distributed.
determine who owns industry
how much of one product is produced
how consumers purchase or receive the product
how are prices determined, how many products
are produced and when

A study of how political systems interact with

economic systems is called political
economy.

History (Pre 1947)

The known Economic history of India begins with
the Indus Valley civilization
From 300 B.C. to 1200 A.D. theMaurya
Empireunited most of theIndian subcontinent.
The political unity and military security allowed
for a common economic system and enhanced
trade and commerce.
During this period India is estimated to have had
the largest economy of the ancient and medieval
world.
Between the 1st and 17th centuries A.D.,
controlling between one third and one fourth of
the world's wealth.

Indus Valley
Civilization
Flourished between 2800 BC
and 1800 BC
Agriculture, Animal
Husbandary
Used tools and weapons
Import-Export Trade
Perfect Urban planning

Pre-Colonial
Period

Assessment of India's
pre-colonial economy
is mostly qualitative,
owing to the lack of
quantitative
information

In 1600, During Akbars reign in the

Mughal Empire the revenue reached
upto 1500M Rs whereas Britain at that
time totaled just 16M
After the fall of the Mughals, India was
administered by Maratha Empire and
the revenue of India was just 100M Rs
After the loss of Panipat, it reduced to
30M Rs

India has been integrated into the

world economy since the 14th century

Its world economy became global

after 1500

Specific routes and points of contact became critical by

1800: especially the coasts and northwest interior

In the 1800s, The British Empire produced a new

territorial domain for the evolution of modern state
power

In 1887, J.N.Tata's Empress Mill arose at Nagpur, in the heart of

cotton country, in 1887.
The Tatas became India's industrial dynasty. Tata Iron and Steel
Works at Jamshedpur consumed increasing supplies of ore and
coal, which by the 1920s rivalled exports from Calcutta.
In 1914, India was the world's fourth largest industrial cotton
textile producer: cotton mills numbered 271 and employed
260,000 people, 42% in Bombay city, 26% elsewhere in
Bombay Presidency (mostly Nagpur), and 32% elsewhere in
British India, at major railway junctures.
Coal, iron, steel, jute and other industries were developed at the
same time, producing specialized regional concentrations of
heavy industrial production around Bombay, Ahmedabad,
Nagpur, Kanpur, Calcutta, Jamshedpur, and Madras.

Historical Share of Global

GDP

www.deloitte.com/dtt/research/0,1015,sid%253D...

Colonial Period
Taxation Environment
Institutional
Environment
Standardized Weights
Capital Markets
Developed system of
Railways and
Telegraphs
Single currency with
fixed exchange rates

Colonial rule brought a major

change in the taxation
environment from revenue taxes
to property taxes
At the end of colonial rule, India
inherited an economy that was
one of the poorest in the
developing world

History (Post 1947)

India has followed central planning for most of its
independent history, which have included extensive
public ownership, regulation, red tape, and trade
barriers.
After the 1991 economic crisis, the central
government launched economic liberalization. India has
turned towards a more capitalist system and has
emerged as one of the fastest growing large economies
of the world.

The Political Economy of Growth in India, 19501980

When the British quit India in 1947 they left behind
an economy scarred by two centuries of policies that
aimed to put the empire first
British invested heavily in a railway system that
linked most of the major towns and cities in South
Asia.
The British could even maintain in 1947 that they
had built India into the worlds tenth largest
industrial power.
There were large textile industries in Ahmedabad and
Bombay.
Iron and steel industry in Bihar and Orissa.

The Political Economy of Growth in India

The grim truth of British misrule was apparent in a
series of famines that hit India at the end of the
nineteenth century, and which culminated in the
deaths of three million people in Bengal in 1943-44.
There were always significant regional variations
within this general picture, but it is likely that as
many as two in three Indians lived in absolute
poverty at the mid-point of the twentieth century.
Against this backdrop, and given the loss in 1947 of
the jute economy of east Bengal (now Bangladesh),
as well as the loss of the major port city of Karachi.

Policy Planning driven by

Ideology: 1950s and 1960s
India remained a virtually closed economy for nearly
four decades after its independence.
In 1947, following an inward-looking development
strategy. The key goal was to achieve self-reliance in
all possible dimensions of economic activities of the
nation
The architecture of Indias post-colonial development
policy framework was inspired by the soviet model of
development.
The foundations of Indias 2nd Five Year Plan model
(Mahalanobis, 1953) closely resembled Feldmans
(1964 [1928]) model developed in the Soviet govt.

Deeper Penetration of SelfReliance: 1970 1985

The decade of the 1960s witnessed several
changes in the global political economy
scenario.
Two neighbourhood conflicts (1962China and
1965 Pakistan) exposed the ground realities
of Indias limited military capabilities and
the consequent vulnerabilities against global
forces and alliances
Indira gandhi and Rajiv gandhi followed the
principles of Nehru.

Nationalisation of Banks
Promotion of Indian businessmen
More investment attraction
Restriction to foreign companies
Political instability
Declaration of emergency
Emerging as a nuclear power
Hindu growth rate of GDP

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