The British Raj had favoured open trade and a small state. Economic development was not a major priority. This changed after independence. State expenditure as share of GDP increased in both India and Pakistan, with the goal of reducing poverty and inequality. Still, the trajectories of India and Pakistan and then Bangladesh varied. Especially in India, policymakers favoured inward-looking economic policies, and were sceptical of trade and foreign investment. The private sector was constrained by regulation. After 1991 Indian economic policy shifted sharply, deregulating and becoming more open to the global economy. Bangladesh and Pakistan moved in the same direction, but less sharply, partly because they were less statist to begin with. Other factors mattered besides government policy: the Internet boom and the service exports it facilitated; substantial remittances by migrants to the Middle East; and the protests of workers, women and other marginalized groups. In this chapter we highlight key elements of these narratives and flag the chapters that discuss them.

This chapter focuses on two major axes of social identity in India: caste and tribe. It provides an overview of the two categories, in particular focusing on how the categories are identified and measured in national-level macro data. It summarizes key features of contemporary economic disparities along these two dimensions. The chapter discusses the overlap between caste/tribal status and religion and provides a summary overview of the racial theory of caste. Tribe as a category has specific dimensions that are distinct from the caste system. The chapter reviews these and moves on to a discussion of the intersection of caste/tribe category with sex. The evidence in the chapter suggests that caste and tribe continue to define socio-economic status in contemporary India. India’s affirmative-action policies addressing caste, tribe and gender disparities are necessary, but not sufficient, to lower the influence of the lottery of birth on individual outcomes.

This chapter describes the history of the industrial labour force as it emerged in South Asia, mostly in current India, since the middle of the nineteenth century. New export-oriented industries created employment for many workers, mostly migrants from often remote rural areas, and mostly men. Despite this growth, the labour force structure did not ‘transform’. Industry never employed more than 10% of the labour force, only a small proportion of that was employed in large-scale enterprises, and many workers remained circulatory migrants. The chapter shows that it is imperative to understand this industrial labour force and forms of worker organization that emerged in the interaction of the nature of capitalist production with a large agrarian and impoverished economy, and of ‘modern’ and ‘traditional’ social relations and identities.

Irrigation development in British India is widely cited as a main achievement of the Raj. The hydraulic projects, which built upon indigenous practice and evolved through ‘learning by doing’, were impressive engineering constructs that brought water to extensive areas of the subcontinent. They permitted expanded agricultural production and exports, bolstered public finances and protected the population from famine. However, the colonial context of the developments has produced contention among historians as to their role and value. This chapter discusses the different forms of irrigation in operation, and the impact of the increasingly large and integrated new systems in changing the pattern of investment and benefits between geographical regions from 1800 to 1947. Taking account of the changing technological and management aspects of the systems over time, and the way cultivators reacted to them, a broad assessment is made of the irrigation inheritance at independence.

This chapter notes that British law was hybrid in character, and also novel, standardized and sometimes ill-matched with India, but nonetheless adopted by many Indians as well as for official policy and purposes. The discussion mostly excludes criminal law but gives accounts of how civil law was applied. First described are codifications of Hindu and Muslim law, the evolving civil court system and laws on landed property and agrarian debt – with impact on production as well as social norms, alongside continuing sociopolitical dominance. Next considered are labour, contract and company laws, with limited range and effect, applying mostly to Western-style enterprises rather than to more substantial indigenous practice. Banks and currency were similarly regulated, with direct Indian influence only in the last decades of British rule. Such comprehensive, uniform law impinged more on some aspects of society and economy than on others, but did gradually and permanently reshape Indian practice.

Internal migration in India since 1850 was greatly facilitated by the revolutions in transport and communications and led to a widening of labour markets; the growth of large cities, canal colonies, mines and plantations; social and national movements; and the creation of remittance economies. This chapter describes the data and ways in which internal migration is measured and understood in the Indian subcontinent and analyses the migration trends over space and time. It also provides an outline of the broader historiography and research themes on internal migration, including periodization, economic theories of migration, causes and consequences of work-related migration, contractors and migration networks, caste, and nativism and anti-migration rhetoric and policies. A central theme of internal migration in India has been that of ‘circular migration’ and the remarkable persistence of the migration hotspots that developed in the colonial period and continue even today.

After the installation of a liberal constitution, the socialist tilt in the aftermath of independence challenged some of the fundamental rights guaranteed by the Constitution, particularly the right to property, culminating in the removal of the right in the 1970s. Apart from noting the consequences of this, the chapter explores the effects of judicial hyperactivity manifest in public-interest litigation, as well as instances of overt judicial deference to the state. The other theme of the chapter follows the market orientation accompanying the 1991 economic liberalization, with the prominent challenge residing in the incapacity of the law and legal structures to govern long-term investment contracts. It is argued that the response – the creation of multiple regulatory bodies – resulted not only in fragmenting the law but also in raising generic social costs. The conclusion reinforces the narratives highlighted over the chapter by looking at arbitral awards imposed on India on account of international investment disputes.

This chapter highlights the factors shaping the trajectory of Indian agriculture since Independence, which has undergone notable transformations. The introduction of high-yielding varieties of wheat and rice ushered in a Green Revolution that propelled India from chronic food insecurity to a situation where food surpluses are the norm. This shift has been marked by increased reliance on markets for inputs, mechanization, a growing commercial orientation for output and the growth of poultry and livestock, often supported by government subsidies and increasingly driven by private investment. These changes have occurred even as traditional institutions, such as interlinked transactions and relational contracts with traders, persist. Indian agriculture has defied global patterns of farm consolidation and is dominated by smallholdings that support a disproportionate number of people. The Indian state faces the formidable challenge of negotiating a trilemma of ensuring the economic viability, environmental sustainability and social sustainability of this large sector.

During the colonial period, investment in India’s physical infrastructure far outpaced that in social sectors. In the first two decades of independence, political energy was focused on political consolidation and national self-sufficiency. Starting in the 1970s, attention shifted to basic needs. We trace the history of public-good provision over the four decades from 1971 to the latest census in 2011. We document the considerable expansion in public goods over this period and the variation in access across states. We illustrate how patterns of provision were the outcome of ‘top-down’ policy priorities interacting with ‘bottom-up’ processes of collective action. For scarce facilities, such as secondary schools, regions within states with political voice were most successful in obtaining access. We show that areas where secondary schooling expanded rapidly were also those where the most marginalized social groups among the Indian castes and tribes experienced social mobility.

India was a poor and unequal country in 1947. Much of its labour force was in low-productivity agriculture, but it had a significant, if small, industrial sector. A plausible trajectory going forward was that rapid industrial growth would draw labour into higher-productivity areas, reducing poverty and inequality. But India went down a different path, beginning with an emphasis on heavy industry. This increased the economy’s productive capacity, but did not generate enough jobs to dent poverty and inequality. Over-regulation and neglect of exports contributed to slow growth until 1980, though agricultural productivity rose with the introduction of new high-yielding varieties of crops in some areas. After 1980, and especially after 1991, policies became more friendly to markets and business and India grew rapidly, led by growth in the services sector. This, however, did not create jobs at the same rate, because the growth was skill- and capital-intensive. Poverty fell substantially, but inequality spiked, and job creation remains a big concern.

This chapter explores small-scale industries during the colonial period. Rather than seeing these industries as a traditional holdover from earlier times, it regards them as a large, vital and dynamic element in the colonial economy. The chapter explores two particularly important industries in depth. Handloom manufacture undoubtedly declined as a portion of the overall economy during the nineteenth century, but by 1880 it had started to grow, forging new markets, introducing new technologies and undergoing shifts in social organization. The production of medicines expanded by adopting new forms of marketing, particularly newspaper advertising. A range of other small-scale industries also grew during the later colonial period. Associated with these developments were the rise of a diverse set of small-scale entrepreneurs, new products and marketing methods; the introduction of small, ‘everyday’ forms of technology; changes in workshop organization; and the construction of new ‘business communities’. But these industries were also characterized by low wages, social dependence and precarity of employment.

The chapter, along with a discussion on India’s population size, and estimates of mortality based on the decennial censuses from 1872 to 1951, reviews at length the factors that explain virtual stagnation in population size during most of the decades. Lack of growth in India’s population from 1872 to 1921 was a result of high mortality due to the spread of epidemics such as cholera, plague and malaria. Their etiology and spread were not fully understood. As a result, the measures taken by the British Raj could not bring deaths under control. Also, recurrent famines – widespread or localized – caused food shortages that resulted in starvation deaths and the spread of water-borne infections during post-famine periods when rains arrived. The period between 1921 and 1951 witnessed modest population growth and the onset of slow but steady decline in death rates. The decline is attributed to control over famines, mass vaccination against smallpox, some improvement in sanitation and an increase in health facilities, mostly in urban areas. However, malaria and diarrheal diseases continued to take a heavy toll when India became independent in 1947.

Gender inequality in India arises from widespread societal attitudes that prioritize the economic and social status of men and, as a result, favour investment in male children. Policy actions have resulted in significant improvements in women’s educational attainment and political representation, but there has been only limited progress in women’s labour force participation, in rates of domestic violence and rape, and in the abatement of trends in the selective abortion of girls. Attitudes pertaining to the status of women also show limited improvement.

When colonial rule began in the mid-nineteenth century, India and Britain were both poor by modern standards, although Britain was somewhat richer. In 1947, when colonial rule ended, the gap between the two was gigantic. Britain was a sophisticated and wealthy economy where per capita income, health and education had improved dramatically, whereas India was still exceedingly poor on all these metrics. India’s economy changed over 200 years: it was far more engaged in international trade, a modern industrial sector had developed and railways criss-crossed the country. At the same time, productivity was low in all sectors of the economy, especially in agriculture. Life was precarious: as late as 1943, a devastating famine took millions of lives in Bengal, a horror that indicted colonial rule. We introduce the reader to this complex story of transformation without enrichment, briefly commenting on how each chapter fits in the narrative.

Trade and finance together formed the third-largest livelihood type in colonial India. These two activities were interdependent because banks and moneylenders mainly financed commodity trade. The combined share of the two activities rose significantly in national income in the early twentieth century. Behind this growth, the expansion of transport infrastructure and an open economy with few barriers to foreign trade were responsible. It was not, however, a business without friction. A great deal of the historical scholarship around these activities asks how environmental risks, information asymmetry, law and politics shaped the decisions of merchants, lenders and firms, as this chapter shows.

In principle, economic development can be environmentally sustainable and compatible with the rights of the poor to the commons – forests, water and land. In practice, however, the economic transformation of India since independence – rapid increase in agricultural productivity, industrialization, urbanization and the building of much-needed infrastructure, has come at the expense of environmental degradation and the rights of the poor to common property resources. Indian economic policy has for the most part favoured ‘development’ over environmental concerns. But India is a democracy in which civil society and the people can protest and exert pressure to prevent environmental degradation and defend their rights to the commons. The Indian judiciary, the Supreme Court in particular, has also been proactive in intervening to protect the environment. As of now, the impetus toward natural-resource-intensive and polluting growth is winning the day, but the struggle to find a better balance continues. Climate change is making the task much harder.

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.