Working Paper: CEPR ID: DP12581
Authors: Bishnupriya Gupta
Abstract: India fell behind during colonial rule. The absolute and relative decline of Indian GDP per capita with respect to Britain began before colonization and coincided with the rising textile trade with Europe in the 18th century. The decline of traditional industries was not the main driver Indian decline and stagnation. Inadequate investment in agriculture and consequent decline in yield per acre stalled economic growth. Modern industries emerged and grew relatively fast. The falling behind was reversed after independence. Policies of industrialization and a green revolution in agriculture increased productivity growth in agriculture and industry, but Indian growth has been led by services. A strong focus on higher education under colonial policy had created an advantage for the service sector, which today has a high concentration of human capital. However, the slow expansion in primary education was a disadvantage in comparison with the high growth East Asian economies
Keywords: long-run development; colonial history; service sector led growth
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inadequate investment in agriculture (Q14) | stagnation in productivity (O49) |
| colonial government's underinvestment in agriculture (N51) | stagnation in productivity (O49) |
| policies of industrialization and the green revolution (O25) | increased productivity growth in agriculture and industry (O49) |
| slow expansion in primary education (H52) | disadvantage compared to high-growth East Asian economies (O57) |
| rise in textile trade with Europe (N93) | decline of Indian GDP per capita (N15) |
| colonial policies (F54) | economic stagnation (P27) |
| technological change in agriculture and planned industrialization after independence (O25) | movement from stagnation to growth (O00) |