The reasons for slow growth may well have included reasons that affected other tropical economies, such as the First World War, adverse terms of trade, the negative impact of the Great Depression, and the isolation caused by the Second World War, according to Bimal Jalan’s book Indian Economy. Lack of industrialisation was another reason.
Source: Maddison Project Database (2018), Business Standard calculations
“Although there had been some palpable industrialisation since the turn of the century, the employment structure had retrogressed with employment in the manufacturing sector having fallen from about 10.6 per cent of the total in 1901 to 9.1 per cent in 1951,” said Jalan in the book.
This lack of an industrial base may well have acted as a drag even as the western world made rapid strides in manufacturing.
Even the few industries that existed were largely concentrated in a few pockets. Ahmedabad and Bombay (now Mumbai) accounted for most of the cotton textiles. Jute was mostly centered around Calcutta (now Kolkata). The two industries accounted for about two-thirds of the manufacturing value added according to the first census of manufacturing in 1946, noted Jalan.
Other factors including caste and level of schooling may also have impeded a transition to a more modern economy: “…productive capacity per worker was constrained by low rates of private and public investment in infrastructure, excessively low rates of schooling, social inequalities based on caste and gender and a delayed demographic transition to lower birth-rates and the resultant heavy demographic burden placed on physical capital and natural resources,” said the 2002 ‘Journal of Economic Perspectives.
In the period after Independence, however, growth rate was significantly higher.
In the analysis above, average annual growth rates in the years leading up to India’s Independence were marked by decades of slow growth. The average growth in the 50 years leading to Independence was 0.06 per cent. In comparison, in the years afterwards — data is available till 2016 — the average growth rate was 3 per cent.
A bulk of this growth came in the recent decades. Since 1991, average growth rate was a little less than 5 per cent. This has picked up. The average growth rate since 2000 was 5.6 per cent.