Poverty or Prosperity in Northern India? New Evidence on Real Wages, 1590s-1870s

by Pim de Zwart (Wageningen University) and Jan Lucassen (International Institute of Social History, Amsterdam)

The full article from this blog was published on The Economic History Review and it is now available open access on early view at this link 

At the end of the sixteenth century, the Indian subcontinent, largely unified under the Mughals, was one of the most developed parts of the global economy, with relatively high incomes and a thriving manufacturing sector. Over the centuries that followed, however, incomes declined and India deindustrialized. The precise timing and causes of this decline remain the subject of academic debate about the Great Divergence between Europe and Asia. Whereas some scholars depicted the eighteenth century in India as a period of economic growth and comparatively high living standards, other have suggested it was an era of decline and relatively low incomes. The evidence on which these contributions have been based is rather thin, however. In our paper, we add quantitative and qualitative data from numerous British and Dutch archival sources about the development of real wages and the functioning of the northern Indian labour market between the late sixteenth and late nineteenth centuries.

In particular, we introduce a new dataset with over 7500 observations on wages across various towns in northern India (Figure 1). The data pertain to the income earned in a wide range of occupations, from unskilled urban workers and farm servants, to skilled craftsmen and bookkeepers, and for both adult men and women and children. All these wage observations were coded following the HISCLASS scheme that allow us to compare trends in wages between groups of workers. The wage database provides information about the incomes of an important body of workers in northern India. There was little slavery and serfdom in India, and wage labour was relatively widespread. There was a functioning free labour market in which European companies enjoyed no clearly privileged position. The data thus obtained for India can therefore be viewed as comparable to those gathered for many European cities in which  the wages of construction workers were often paid by large institutions.

We calculated the value of the wage relative to a subsistence basket of goods. We made further adjustments to the real wage methodology by incorporating information about climate, regional consumption patterns, average heights, and BMI, to more accurately calculate the subsistence cost of living. Comparing the computed real wage ratios for northern India with those prevailing in other parts of Eurasia leads to a number of important insights (Figure 1). Our data suggests that the Great Divergence between Europe and India happened relatively early, from the late seventeenth century. The slightly downward trend since the late seventeenth century lasted and wage labourers saw their purchasing power diminish until the devastating Bengal famine in 1769-1770. Given this evidence, it is difficult to view the eighteenth century as period of generally rising prosperity across northern India. While British colonialism may have reduced growth in the nineteenth century — pretensions about the superiority of European administration and the virtues of the free market may have had long-lasting negative consequences — it is nonetheless clear that most of the decline in living standards preceded colonialism. Real wages in India stagnated in the nineteenth century, while Europe experienced significant growth; consequently, India lagged further behind.

With real wages below subsistence level it is likely that Indian wage labourers worked more than the 250 days per year often assumed in the literature. This is also confirmed in our sources which suggest 30 days of labour per month. To accommodate this observation, we added a real wage series based on the assumption of 360 days labour per year (Figure 2). Yet even with 360 working days per year, male wages were at various moments in the eighteenth and nineteenth centuries insufficient to sustain a family at subsistence level. This evidence indicates the limits of what can be said about living standards based solely on the male wage. In many societies and in most time periods, women and children made significant contributions to household income. This also seems to have been the case for northern India. Over much of the eighteenth and nineteenth centuries, the gap between male and female wages was smaller in India than in England. The important contribution of women and children to household incomes may have allowed Indian families to survive despite low levels of male wages.

To contact the authors: 

Pim de Zwart (pim.dezwart@wur.nl)

Jan Lucassen (lucasjan@xs4all.nl)