Since the Golden Age of Guptas dating back to 3rd century BCE until the 17th century AD, Indian economy was the largest in the world, fluctuating between 20 to 30% share of the global GDP. In fact, until the 17th century, the combined economies of India and China accounted for about 50% of the global GDP. After that the economies of both India and China started declining for entirely different reasons (https://en.wikipedia.org/wiki/Economic_history_of_India).
Indian subcontinent is blessed with ever flowing rivers, robust agriculture and flora and fauna, a large population of domestic cattle that is second only to Afica, vast reserves of minerals and mines. So, one can say that it is no wonder that India had such a strong economy. However, the driving force for the strong Indian economy for almost two millennia starting from the Golden Age of Guptas was India’s “open commerce and trade with other countries” that contributed to the famous Silk Route and forced Christopher Columbus to travel Westward across the oceans to find an alternative route to India just to circumvent the fall of Constantinople into the hands of the Arabs. Indian merchants traveled by sea also to trade with other countries in Asia and North Africa. Thus, historically, India was never a “closed commerce” nor had socialistic policies that controlled the market economy inside its borders. In fact, the Arthashastra written by Chanakya, the greatest political philosopher and economist of the 3rd and 2nd century BCE, who codified the business practices, was the guiding principle of open commerce for Indian merchants and tradesmen in their dealings within and outside India. Many of the principles of today’s Western economics, such as accounting, bookkeeping, taxation and even auditing can be traced back to Arthashastra.
The age-old and established business practices in India were disturbed by the foreign rule, especially, the British, which introduced regulations that benefited them. At the time the British East India Company entered India the economy of India was 22% of the global economy. However, by the time India attained independence in 1947 the Indian economy was barely 9% of the global economy. At that time, Instead of reverting to the age old and proven practices of an “open market”, India adopted a “closed market” that effectively cut off its ability to expand and tap into the world market, at a time when the European and American economies were expanding and together accounted for about 50% of the global economy. Furthermore, the rise of US dollar as the global hard currency effectively replaced gold and gems which were historically used as standard “currency” for international trade. By cutting off itself from the global market, India lost the ability to accumulate the hard currency needed for the payments to imports. In fact, at times India was forced to borrow dollars against its gold reserves, which is not a healthy practice. Thus, over the decades, the economy of post-independent India deteriorated with shrinking opportunities in the face of an explosive population growth and lack of the potential to create jobs outside the public sector. By late 1980s, the Indian economy was touching the rock bottom.
Just at the time when its economy was touching the rock bottom, India saw the advent of a second Chanakya in the form of Sri P. V. Narasimha Rao who became the Prime Minister of India under unusual circumstances following the assassination of Rajiv Gandhi. Sri Narasimha Rao, a genius in his own style, had a clear choice in front of him – either take bold decisions and act and thus pull India out of the economic crisis or do nothing and sink with the sinking ship. He did the right thing and boldly opened the market, which was not an easy task in a country where indigenous businesses and industries were deeply rooted and monopolized the market for more than four decades without any open competition from technologically advanced industries from the East and West. Some so called economic gurus in India even forecasted that sudden opening of Indian market to robust outside economies will cause collapse of the Indian industries and businesses. But they were proved wrong. Indian businesses and industries rose to the occasion and met the new challenges. It seemed that suddenly a hidden energy was unleashed. Western media commented that the elephant finally woke up from its long slumber and is realizing its strength. Yes, the economic potential of India was buried deep by the policies that weakened it. When those policies were removed, the hidden potentials were unleashed and the businesses and industries not only survived the challenges of the open market, but also expanded and created the most needed jobs in the country. Today, with a GDP growth rate that no other BRICS country can match, India is positioned to become one of the leading economies of the 21st century and also had a vast human capital which is very young and is highly mobile. The credit for all these should go to Sri P. V. Narasimha Rao. It is aptly said that true leaders enable people to realize their potentials and unleash them and thus help themselves. That is what Sri P.V. Narasimha Rao did to India, which no other leader in the post-independent India did. But unfortunately he did not receive the credit and recognition not just in India, but even among his own party men. But the world is not blind. Sri Narasimha Rao’s contribution to the rise of post-independence India is being recognized by many world economists, who have no political inclinations, and thus are very objective in their assessment. Here is an article published by the BBC recognizing Sri Narasimha Rao’s contribution and how he pulled out the sinking ship successfully at the nick of the time.
Reassessing India’s ‘Forgotten Prime Minister’
Author: Bellamkonda K. Kishore, M.D., Ph.D., MBA