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The Economy of Mughal India – with Angus Maddison

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I read a couple of chapters of Angus Maddison who described Indian economy and its pitfalls quite vividly. Angus Maddison is a world-renowned economic historian who is famous for his work on estimating the past GDPs of modern economies by different measures. I won’t go much details into his original work, but the pieces he wrote about Indian subcontinent are worth-reading.

In short, both Mughal and British empire were significantly “elitist” and “extractive“, i.e. from power to money – everything was in the hands of a few. Contrary to the widespread belief in India, the common mass lived a little above the sustainability level and were hit by periodic natural calamity and crop-failures. The system or the economy in general was built to grind the common people into de-facto slavery. In this blog-post, I will focus on the Mughal rule (read the British one also).

The Elitist Mughals

To start with the Mughal system, Maddison notes –

“India had a ruling class whose extravagant life-style surpassed that of the European aristocracy.It had an industrial sector producing luxury goods which Europe could not match, but this was achieved by subjecting the population to a high degree of exploitation. Living standards of ordinary people were lower than those of European peasants and their life expectation was shorter.”

To expose the elitism in Indian society, he notes that the major export items those India had at that time were “salt-peter (for gunpowder), indigo, sugar, opium and ginger” but the import items were nothing but silver, gold and other precious stones. This highlights that on the national level, India exported items produced by ordinary populace where they imported items for elites only. Maddison went on the compare the European standard of living with the Indian ones –

“In spite of India’s reputation as a cloth producer, Abul Fazl, the sixteenth-century chronicler of Akbar, makes reference to the lack of clothing in Bengal, ‘men and women for the  most part go naked wearing only a cloth about the loins’. Their loincloths were often of jute rather than cotton. In Orissa ‘the women cover only the lower part of the body and may make themselves coverings of the leaves of trees’. They also lacked the domestic linen and blankets, which European peasants of that period would have owned.”

So the common people perished where the wealthy had it all. While average Indians didn’t have cloth to wear on, the Indian muslin were famous in Europe and was noted for aristocracy.

The health condition of common people was equally bad. Indian population almost stagnated for about 2000 years –

“Kingsley Davis has suggested that mortality rates in India were high enough to offset the very high fertility rates, so that there was little increase in population in the 2,000 years preceding European rule.”

The System of Exploitation

There lies the hierarchy and Maddison got it correct. The Indian system worked through the caste hierarchy and the agro-income from the lowest strata of the society used to bubble up as taxes to the upper elites.

“The revenue of the Moghul state was derived largely from land tax which was about a third or more of gross crop production, i.e. a quarter or more of total agricultural output including fruits, vegetables and livestock products which were not so heavily taxed … Total revenue of the Moghul state and autonomous prince-lings and chiefs was probably about 15-18 per cent of national income. By European standards of the same period this was a very large tax burden”

Not only the taxes were high, the tax money were used mostly in “consumption expenditure of the ruling class”.  Maddison further notes that the Jagir system in India was not hereditary and the Jagirs were posted from place to place. So, he “had an incentive to squeeze village society close to subsistence”. The village society was very docile and governed by the rules of caste. That was the primary reason why India was smoothly ruled by outsiders for years as Indians were more concerned about their “karma” as per their “caste” and not to sidestep it for a larger or revolutionary role in the society. One notable absence, as per him, was that Indians rarely tried to take up sea-trade as part of their profession since “religious beliefs inhibited foreign travel and commercial development by Hindus”. Furthermore, caste stagnated the society to new ideas and technology unless they are imposed from the rulers –

“In spite of extensive contact with foreigners, India did not copy foreign technology either in shipping or navigation, or in artillery and military organization, and this is one of the reasons it was conquered by Europeans. “

On the other hand the revenues from this exploitation channels were put in to the “hoarding precious metals and jewels and “construction of palaces and tombs”. The total land-irrigation work undertaken was as little as 5% of the total fertile-land.

On the brighter side though, Maddison mentioned that religious institutes in India did not consume as much money as it did in Europe.


In summary, in spite of a few glitches (I would discuss those later), Maddison probably got to the closest to the reality. There are very few Indian scholarly articles that could now-a-days confirm that Indians on an average were richer than the Europeans or the Arabs at the same time. The perils of elitist economy would be felt sooner than anyone expected – during Industrial revolution. The major Indian produce – things such as muslin – were dependent on aristocrats to buy. In a world where mass-production was much more important than elite products – Indians were bound to lose the trade war. Moreover, the producer lived in perils and he had little incentive to innovate or take his production scheme to the next level. All things necessary to produce a failed state were gathering mass under the lavish Mughal aristocracy. The myth of rich Mughal India is thus just another myth.

The primary resource – Class Structure and Economic Growth: India & Pakistan since the Moghuls (1971) by Angus Maddison.

Written by Diganta

February 4, 2013 at 11:57 pm

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