Angus Maddison, the famed British economic historian who passed away earlier this year, is best known for his estimates of world gross domestic product (GDP) that go back all the way to the year 1 AD. In recent times, his charts have been used to tell the fascinating story of how the share of India and China in world GDP used to be very high till about 1600 AD, but started declining thereafter as they missed the industrial revolution. With their current rapid growth, their share in the world economy is now rising once again.
In 1000 AD, according to Maddison’s calculations, China and India together contributed 50.5% of world GDP (GDP being computed in 1990 dollars and in purchasing power parity (PPP) terms). By 1600, that share had gone up to 51.4%, with China accounting for 29% and India 22.4% of world GDP. A hundred years later, China’s GDP had fallen but India’s went up to 24.4% of world output. By 1820, however, India’s share had fallen to 16.1%. By 1870, it went down to 12.2%. International Monetary Fund (IMF) projections indicate that India’s share of world GDP would be 6.1% in 2015.
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Was colonialism to blame? Did the drain of wealth to Britain impoverish a once wealthy country? Or was the decline in importance merely the result of the rise in productivity in Europe?
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Well, the growth of India’s GDP between 1500 and 1600 was 22.7%, between 1600 and 1700 it was 22.2% and between 1700 and 1820 it logged 21%. So it’s not as if there was any huge decline in the rate of growth. Of course, that doesn’t preclude the possibility that Indian growth, too, may have taken off if the country was not under the thumb of the British. But China continued to be an independent country, albeit one much plagued by the Western powers, and its rate of growth too during the period was nothing to be proud of. What the data seem to be saying is that the coming of the British did not, at least in the first 100 years of colonial rule, make much of a difference to the growth rate of the Indian economy.
Was India a wealthy country before the British came? The numbers that have garnered the most attention have been his GDP estimates, because they fit in with the narrative of a strong India and China getting back their clout in the world economy. But what is that to the average Indian or Chinese citizen? What if the only reason these countries had such a high GDP in earlier times was because they had a larger population?
That is what is brought out by Maddison’s estimates of GDP per capita, again in PPP terms in 1990 dollars. In 1 AD, India’s GDP per capita was $450, as was China’s. But Italy under the Roman Empire had a per capita income of $809. In 1000 AD, India’s per capita income was $450 and China’s $466. But the average of the West Asian countries, such as Turkey and Iraq, was much higher at $621. In terms of general prosperity, therefore, it was the Arab world that was doing well a millennium ago. The Caliphate in Baghdad was a centre of power at the time and both science and culture flourished.
By 1500, though, new centres of prosperity had emerged. India’s per capita income was $550 and China’s $600 in 1500. The Arab world had declined. But standards of living in Western Europe at that time had already gone far ahead. Italy topped the table, with a per capita income of $1,100, the Netherlands following with a per capita income of $761. This was the Italy of the Renaissance, the Italy of Michelangelo and Leonardo da Vinci, of Raphael and Titian. The UK was not far behind, with a per capita income of $714.
By 1600, the centre of Europe had shifted northwards and the golden age of Holland had begun. Dutch per capita income was $1,381 in 1600, while Britain in Shakespeare’s time had a per capita income of $974.
Recall that 1600 was the year the East India Company was founded. In contrast, India’s per capita income continued to be $550, while China’s was $600. Note that even Ireland, one of the poorest of Western Europe’s countries, had a per capita income of $615, higher than India’s and China’s. In short, the per capita GDP numbers mirror the changes in power, prosperity and cultural and scientific achievement.
It wasn’t till 1981 that India had a per capita income of $977, beating that of Britain in 1600. And it wasn’t until 1993 that India’s per capita income of $1,399 surpassed what the Dutch had achieved in 1600. Maddison’s calculations show that in 2008, India’s per capita GDP ( in 1990 dollars, PPP terms) was $2,975, slightly more than one-third of the world average of $7,614. We have a long way to go.
Graphic by Yogesh Kumar/Mint
Manas Chakravarty looks at trends and issues in the financial markets. Comment at email@example.com