South Asia is often referred to as the Indian Subcontinent because its land mass broke away from the southern part of Africa more than 65 million years ago, drifted north, and “collided” with the Asian land mass to become part of Asia. The upheaval along the lines of the collision that occurred over millions of years (and is still continuing) led to the formation of the world’s tallest mountain range – the Himalayas. The volcanic activity that occurred on the subcontinent during its northward drift is linked to the extinction of 98% of the species on earth at that time, including the dinosaurs, and resulted in the formation of the Deccan plateau – among the largest igneous regions of the world covering most of peninsular India.
Aboriginal and tribal populations lived in India long before recorded history, which begins with archeological evidence of the Dravidian civilization dating through the 3rd to the 2nd millennium BC. Aryan tribes drifted into the subcontinent in the 2nd millennium from the region of the Caspian Sea, bringing with them Vedic traditions, the Hindu religion, and Sanskrit – a language of the Indo-European group that has common roots with early Persian and Latin. India was a patchwork of monarchies and republics in the 7th century BC when Siddhartha was born in one of the royal families and went on to become the Buddha – founder of the Buddhist religion that is followed in many parts of Asia.
Most of the country was united under one administration for the first time during the Maurya period that reached its zenith under Ashoka in the 3rd century BC. The first half of the 1st millennium AD was a period of relative peace, prosperity, and economic achievement when India accounted for about a third of world GDP. The country assimilated waves of Muslim invaders and immigrants from the north and northwest during the latter part of the 1st millennium AD and well into the 2nd. The last of these were the Moghuls who ruled large parts of the country from the 16th to the 18th century, bringing variety and leaving behind indelible influences on myriad aspects of social and civic life, from language and religion to the arts, handicrafts, and architecture. Trade, industry, and commerce did well and India was still the world’s single largest economy in the early part of the 18th century, accounting for 20-25% of world GDP.
The British, together with other Europeans, began as traders in India in the 17th century and ended up ruling and administering the country. The 190 years of British occupation helped the country integrate through nationwide railways and telecommunications, national institutions such as the judiciary, postal services, national armed forces, administrative services, and the national movement for independence. Many of the national institutions today remain a legacy of the British administration, in some instances with little change over the years. However, British rule did ruin the economy – the country was unable to keep pace with the rest of the world and accounted for merely 4% of world GDP at the time of Independence in 1947.
British rule ended disastrously, with the partition of the country. Independent India, although secular and democratic, struggled to kick-start the economy. The government invested heavily in industry while inadvertently stifling private enterprise in its endeavor to redistribute wealth. The country was perceived to be pro-communist during the cold war and leaned more heavily leftward in the 1960s and 70s. Nationalization, the opposite of privatization, resulted in the government taking over and monopolizing large domains of economic activity including mining,insurance, and the banking system. Product patents for chemicals and pharmaceuticals were abolished in a bid to bring down prices and make drugs affordable for the poor – a move that eventually succeeded beyond expectation. Price controls were also introduced on essential drugs irrespective of whether these were imported or locally produced. Curbs on private enterprise led to the “License-Permit Raj” – big government, and an enormous bureaucracy. Although public investments made from international borrowing, and the ingenuity of private entrepreneurs in adverse circumstances ensured that the economy kept growing, even if at a “Hindu pace”, India’s share of the world economy had fallen to 3% by 1973.
A balance-of-payments crisis in 1991 led to the first wave of purposeful liberalization. The ill-conceived policies of previous decades were reversed and the economy gathered momentum. Signing the GATT/WTO Agreement in the mid-1990s brought the country into the era of globalization, helped along by the coming of age of telecommunications and the Internet. Government investments in higher education made in the 1950s and 60s began to pay off at last as information technology boomed. Liberalization unleashed latent entrepreneurial instincts and led to the growth of start-ups in the new economy. The GDP growth rate picked up to 10.4% in the last quarter of 2003, beating China for the first time in a long time. WTO-led lifting of quota restrictions, intellectual property protection for chemicals and pharmaceuticals, a demographic dividend, and further doses of fiscal and macroeconomic liberalization are expected to generate sustained growth and rise in income levels. By the mid-twenties India is expected to be the third largest economy after China and the United States.