‘After Da Gama: Real wages in Western India, c. 1500-c. 1650’
By Hélder Carvalhal (Univ. of Manchester), Jan Lucassen (International Institute of Social History, Amsterdam), and Pim De Zwart (Wageningen University & Research)
How did living standards fare in India over the last five centuries? This central question in economic history, both for the debate of the Great Divergence as well as for the Indian long-run economic development, has been debated for over a century, given the pioneer studies of Moreland (1923) and Narain (1929). Until recent decades, the paucity of data available has prevented any consensus about the timing of the Great Divergence between India and other parts of the world.
Parthasarathi (1998; 2011) and Sivramkrishna (2009) claimed that until the early nineteenth century Indian real wages were on a similar level as those in Europe. In turn, Allen (2007) and Broadberry and Gupta (2006) found that workers in many parts of India were already comparatively poor by the late seventeenth century. Evidence on GDP per capita also confirmed lower average incomes in India from 1600 (Broadberry et al. 2015), while Studer’s (2008) work also suggested the lack of integration across Indian long-distance markets until the late nineteenth century.
Recent evidence suggests that, from the late seventeenth century onwards, real wages between Britain and northern India diverged, as workers’ incomes declined in India as those in Britain increased (De Zwart and Lucassen 2020). This Anglo-Indian divergence then continued over most of the eighteenth century as Indian real wages continued to decline until the 1770s. After a short period of rising purchasing power between the 1770s and 1820s, real wages stagnated and decreased until at least the 1870s. But what happened prior to the late seventeenth century?
In this paper, we collected and analysed a dataset containing 2,710 separate wage observations, referring to no less than 76,058 paid-out wages for nine locations in western India between 1510 and 1640. This dataset was assembled mostly from Portuguese sources from the Estado da India, compared with Dutch and English evidence from the 1610s to 1640s. Based on these newly unearthed archival materials, we conclude that between the early 1500s and the 1630s, the overall trend in nominal wages across Western India was stagnant, but that there were two periods in which nominal wages peaked: in the 1520s and in 1620s. At the same time, food prices steadily increased over the same period, causing the purchasing power of these wages to decline over the sixteenth and early seventeenth centuries.
Figure 1: Real wages in Eurasia, expressed in subsistence baskets per day, 1500-1800
Sources: India: De Zwart and Lucassen (2020); Oxford; Allen (2001); Beijing: Allen et al. (2011); Madrid: López Losa and Piquero Zarauz (2021); Japan: Kumon (2022); Lisbon: Palma and Reis (2019) (basket created by the authors).
Figure 1 demonstrates that in the 1510s, one day of unskilled labor in Goa (used as case of reference) can sustain 1.6 person, a number that increases to 3.7 in the 1520s. After that, real wages decline fast to 1.5 in the final decades of the sixteenth century. After a brief rise in 1620 to nearly three times subsistence levels, the real wage drops to below two implying that one worker cannot even provide for one additional (adult) household member besides himself. Therefore, these workers at the bottom of the income pyramid needed other family members to contribute to household income to survive. In real terms, living standards were thus low after the 1520s. Moving to the comparison with other parts of the world, there is a substantial gap in purchasing power between Goa and all available series for Europe in the early 16th century. Otherwise, living standards are generally comparatively low in Goa and in 1630 even dropping below Japan. Purchasing power in Agra surpassed that in Lisbon in the 1590s and that in Madrid around 1800. Data on Beijing suggest those figures are more or less in line (or slightly above) those in Bengal (Allen et al. 2011). Overall, we can roughly discern three patterns: ‘modest prosperity’ in north-western Europe and Spain until the 1720s, ‘poverty’ in Portugal, Spain (after the 1720s), Yangzi delta, and northern India, ‘extreme poverty’ in western India and Japan. On the basis of this evidence, we suggest that the Great Divergence between western Europe and India goes back at least to the 1500s.
How can we explain these long-term trends? Two plausible orders of explanation for the low performance of Western Indian living standards (or the combination of the two): external or internal. The decline of both intercontinental and intra-Asian overseas trade had a negative effect on the economy of the Estado da India, leading to a lower demand with consequences on the labor market. On the other hand, internal factors, such as the imposition of a ‘stricter’ set of colonial policies, and possibly stagnating agricultural productivity, contributed to the lowering of living standards of Indian populations. We still miss, however, a pre-1700 comparative view of Indian policies (economic and monetary, political, and cultural) that can account for these developments elsewhere in India, before the rise of European imperialism from the late 18th century onwards.