The chapter examines how India’s emergence as the world’s largest source of international migrants has affected its economy. It first provides a brief framework to understand international migration’s economic effects, arguing that these depend on selection and sorting effects inherent in migration: who goes, how many go, where they go, why they go and how many return. It then examines the different mechanisms and magnitudes of these effects through different types of financial flow via both the current account (remittances) and the capital account (bank deposits, bonds, FDI), via the network effects of the diaspora on trade and via human capital effects due to a ‘brain drain’. It concludes by arguing that the economic effects of migration on India have depended primarily on factors within India. People leave for a reason and will invest only if it makes financial sense to do so.

This chapter deals with the aspects of political economy in British India from c. 1850 to c. 1950, focusing on the major debates and controversies about economic policies, which concerned the role of the colonial state and its implications for British imperial policies. British India had wider economic relations with surrounding Asian and African regions, located as it was within dense regional trading networks, as a hub of transactions of goods, money, people (migration), services and information. Through the development of global economic history, new works and interpretations are presented as a new paradigm against the traditional Eurocentric approach. Using recent works by Asian and Japanese scholars, this chapter analyses a changing economic shift from trade to finance in British India and the transformation of the economic international order of Asia and the role of India in the interwar years, with a special focus on the drastic impacts of the Second World War.

The chapter emphasizes three aspects. First, it points out that, in the colonial period, Indian entrepreneurs were able to establish industrial enterprises in the cotton, jute and iron and steel industries that competed successfully in domestic and overseas markets. Second, it argues that the fact that Indian industrialization emerged from the bazaar economy facilitated the entrance of Indian capitalists into manufacturing and provided them with an advantage for accessing interior markets. The chapter also explores why Indian enterprises failed to engage in highly specialized areas such as the electrical or the pharmaceutical industries or the manufacture of cars, ships or aeroplanes until the mid-twentieth century. Third, the chapter argues that it would be short-sighted to merely focus on the subcontinent or on Indo-British relations when examining the economic development of India in the colonial period. Rather, it points out that Indian economic history needs to be examined within a global framework.

Located on a large delta, eastern India confronted a series of ecological challenges in the previous centuries – from the filling up of marshy lands to deforestation. But its developed state of agriculture and handicrafts placed it at the forefront of the country’s economic development, attracting foreign traders to settle therein, and finally to establish their rule in this region. But the question is: how did its economy perform during colonial rule? Indeed, the economic environment that it confronted was not always conducive. Initially, it received a boost from the trading activities of the Company. But later on, an uncongenial environment followed, ruining its age-old industries. Also, many opportunities emerged, thereby giving rise to many modern industries. The chapter seeks to highlight how eastern India’s economic development was shaped during colonial rule. Apart from agriculture and industry, it discusses the development of transport facilities, and also demographic issues, including migration.

Under the extremes of Indian socialism, the financial system was a handmaiden for state control of the economy, directing resources according to the wishes of the government. State control was achieved through government ownership. A great deal has changed, with a first (1947–1992) and second (1992–2016) phase of central planning where there were conflicting themes of liberalization and enhanced state control. In many areas, private financial firms are now important. The full ecosystem of modern finance, with information processing and risk taking by private persons, blossomed in the equity market. For two decades there was a remarkable policy process that yielded gains in fields such as the equity market, pension reforms, bankruptcy code and so on. But alongside this there was the expansion of the ‘administrative state’ in the form of financial regulators. Regulators engage in micro-management of products and processes. While there is isomorphic mimicry with many things that look like a financial system, officials retain substantial control over how finance works. In a functional perspective, Indian finance today resembles the environment of the 1980s more than meets the eye.

The chapter surveys the economic consequences of the 1947 Partition. It highlights that these were long term and complex, not confined to the ‘hotspots’ of Punjab and Bengal, but subcontinental in scale. Borders disrupted transport and river networks. Large-scale violence destroyed homes and properties, while refugee resettlement profoundly impacted the socio-economic fabric of major cities, notably Calcutta, Delhi, Lahore and Karachi. As most manufacturing units were in India, Pakistan began with a relatively weaker industrial base. The economies of Punjab and Bengal were impacted in multifaceted yet divergent ways. While economic effects in Bengal were largely deleterious, the Punjab quickly overcame adversity, emerging as a pioneer of the Green Revolution. Pakistan emerged as a geopolitical anomaly. Disparities in per-capita income and resource-sharing vitiated relations between eastern and western wings. Border regimes created economic silos, restricting labour mobility, especially in Bengal. Ports and maritime networks were impacted, bilateral trade suffered due to exchange rate disagreements and conflicts arose over water sharing, necessitating international mediation.

Agriculture was the main pillar of the Indian economy under British rule. Production increased in the second half of the nineteenth century, when the agricultural area expanded, the cultivation of cash crops spread, irrigation networks were extended and export of agricultural commodities increased. In the first half of the twentieth century, production stagnated as room for further area expansion vanished, technical breakthroughs to enhance per-acre yield were limited, and the public investment in infrastructure lost its momentum. Bengal and eastern Indian areas experienced the most stagnation, while Punjab and Madras continued to grow with improvement in land productivity, including shifts to higher-value-added crops. Nevertheless, on average, the absolute level of land productivity of major crops in colonial India lagged behind global standards of that time. The chapter suggests that limited resource endowments constrained by inadequate technical breakthroughs and institutional constraints, such as the structure of land rights, were the main causes of stagnation.

India’s states or regions – heterogeneous by population size, language, geography, creed and culture – have broadly followed the national economic performance and structural transformation. However, inter-regional inequality (among its other dimensions) has risen unabated, with stability in their ranks and shares of output and employment. There are few signs of unconditional convergence. Yet interstate labour migration has remained modest, though rising. Mandatory tax-sharing methods and policy goals have failed to dent rising inequalities. Though following national policy templates, states have charted varied development paths, with contrasting outcomes. A rising ‘north–south’ divide is discernible, with Kerala in pole position in social progress, while Gujarat prioritizes output growth. Large north Indian ‘BIMARU’ states remain bimaru, with persistent gaps in health and social development outcomes relative to the national average. Beneath the seeming state-level stability, discernible churn among districts, crops, clusters and urban enclaves is evident, without significantly transcending the states’ pecking order.

A great deal of the scholarly debate and discussion on independent India’s history of employment is centred on why modernization and diversification of the economy did not draw more people out of agriculture, which was one of the key aims of economic policy at independence. Starting with that issue, the chapter analyses long-term data to reveal a number of ways employment, wages and working conditions changed. These trends include impressive growth in service sector employment, a recent rise in the share of the formal sector in employment and rapid growth in real wages in agriculture. However, the key question remains why manufacturing continues to take a relatively small share of the addition to the labour force.

This concluding chapter looks ahead to the challenges facing the economies of Bangladesh, India and Pakistan. The three countries have several challenges in common, including the threat of climate change, the low status of women and the potential of artificial intelligence and robotics to undermine badly needed jobs for their young and growing populations. There are some differences: women’s participation in the labour force is rising in Bangladesh, falling in India and lowest in Pakistan. Bangladesh and India have been on good growth trajectories for the last few decades, but Pakistan’s growth has been slower and less stable. We see many opportunities for research. On the one hand there are neglected areas, such as the princely states of colonial India. On the other hand, the digital revolution has made historical and present-day sources, including data, far more accessible.

Bangladesh became an independent country in 1971. Its territory was formed of the former East Pakistan (1947–1971). Consisting mainly of the well-watered and alluvial eastern Bengal delta, Bangladesh’s economy was mainly agricultural in 1971. Although such large-scale industries as textiles and tea and such small-scale industries as handloom weaving existed on an extensive scale, an overwhelmingly large proportion of the employed workforce was engaged in agriculture. High population density, a low land–person ratio and rural poverty made diversification of the economic base an acute necessity and a challenge. A significant transformation did happen through the Green Revolution, an effective social policy that delivered a demographic transition, and a few large-scale industries forged ahead. The chapter shows how market forces, global influences and state policies combined to shape that process.

This chapter offers a global perspective on Indian education in the colonial era. Indian literacy was significantly below Western Europe in 1800 when adult English literacy (53%) was ten times higher than that of India (estimated to be 6%). While schooling and literacy increased between 1870 and 1940, improvement in India was small compared to the rest of the world. Low income, low fiscal capacity and being a colony all constrained colonial India’s ability to expand mass education, along with norms, for example, that undervalued female education.

This chapter discusses the employment of poor and labouring women between the mid-nineteenth century and the mid-twentieth. In this period, they suffered first a loss of their independent occupations in manual manufacturing and then exclusion from mechanized large-scale industry. This marks the beginning of a persistent and long-term pattern of low female workforce participation in India. The discussion is organized around multiple themes of marginalization, quantitative and qualitative: first, the question of numerical decrease in household industry, craft production and the small-workshop sector; second, the ideological exclusion from mills and mines, which were emerging as preserves of adult men earning family wages; third, resistance to women’s long-distance employment on contracts in plantations, which was perceived as a challenge to familial control over their labour; fourth, commercialization of women’s reproductive work in sectors such as midwifery, domestic work and sex work, providing increasing employment but under stigmatized conditions. These themes are linked to questions of regulation by family, caste, community and the state.

This chapter describes the financing and building of Indian railways, the largest infrastructure investment of the colonial state, and assesses their economic effects. Due to the poor quality of pre-rail transport, railways integrated markets, reduced price dispersion and increased incomes in colonial India. Net earnings as a share of capital were low in the first wave of railway construction and operations because of moral-hazard problems. As the Government of India took ownership of railways from private British companies, working expenses decreased and net profits improved with no negative effects on productivity. Yet the government did not always maximize their railway profits, opting to purchase more expensive British locomotives over cheaper alternatives. Despite these shortcomings, railways were a unique sector of the colonial economy. By the twentieth century, railways were delivering significant tax revenues to the Government along with higher incomes to the country.