Economic Factors in the Decline of the Mughal Empire

The economic factors in the decline of the Mughal Empire were complex, mutually reinforcing, and operating over a long period. They included the inflation of the late seventeenth and early eighteenth centuries, the population growth that had outstripped the productive capacity of the agrarian economy, the agricultural crises precipitated by war and climate change, the trade imbalance with Europe, the European drain of wealth, the disruption of the Indian textile industry, the financial cost of Aurangzeb’s Deccan wars, the disruption of the silver supply, the role of the Little Ice Age in the climate history of the period, and the impact of the major famines. The principal treatment of the broader context is the economic decline of the Mughal Empire page, and the connection to the jagirdari crisis is treated in the relevant page. This article focuses on the specific economic factors in the decline.

Inflation

The Mughal economy of the seventeenth century was heavily monetised, and the silver rupee, minted according to the system inherited from Sher Shah Suri, was the basis of the imperial fiscal system. The price level rose significantly between Akbar’s reign and Aurangzeb’s, and the cumulative inflation of the seventeenth century was a major fiscal challenge to the Mughal state. The inflation was driven by the significant expansion of the money supply produced by the New World silver, by the rising population, and by the rising fiscal demands of the state. The phenomenon is examined in detail in the economic decline of the Mughal Empire page.

A particular form of currency debasement became significant in the late seventeenth and early eighteenth centuries. The rupee in circulation contained progressively less silver as the imperial mints, under fiscal pressure, reduced the silver content of the coins. The debasement was a symptom of fiscal crisis rather than a cause, and the state was resorting to the mint as a source of revenue at precisely the moment when its other revenue sources were contracting. The cumulative effect of debasement, combined with the disruption of the silver supply caused by the European reorientation of the bullion trade, was a serious distortion of the monetary system and a contribution to the broader price inflation of the period.

Population Growth

The population of the Mughal empire grew significantly over the seventeenth century, and the growth placed considerable pressure on the agrarian economy. The population of south Asia in the late seventeenth century has been estimated at perhaps 150 to 175 million, and the growth of population in the previous century had been major. The growth of population outpaced the growth of agricultural production in many regions, and the result was a downward pressure on the per capita availability of food and a corresponding pressure on the agrarian economy.

The connection between population growth and economic decline is examined in the economic decline of the Mughal Empire page. The growth of population was a major factor in the fiscal crisis of the late empire, since the state was unable to extract a rising revenue from a stagnating agrarian economy. The consequence was a considerable pressure on the fiscal system, examined in detail in the jagirdari crisis and the mansabdari system pages.

Agricultural Crises

The late Mughal period was marked by a series of major agricultural crises. The most important of these was the Chalisa famine of 1630–1632, a catastrophic failure of the monsoon combined with the disruption of agricultural production in Gujarat and the Deccan. The famine is remembered in popular memory as the sati famine because of the large number of widows who immolated themselves on their husbands’ funeral pyres, a vivid illustration of the social consequences of agrarian catastrophe.

The Durga Devi famine of the 1680s and 1690s was a more drawn-out crisis associated with the Deccan wars and the disruption of agriculture in the Deccan and the upper Doab. The famines of the 1730s and 1740s, associated with the invasion of Nadir Shah and the disruptions of the Maratha and Afghan incursions, imposed further strain on the agrarian economy. The Bengal famine of 1770, the Chiyattorer Manvantar, occurred in the period of British control and is estimated to have killed as many as ten million people, perhaps a third of the population of Bengal, in one of the deadliest famines in recorded history. The broader context of the agricultural crises is examined in the economic decline of the Mughal Empire page.

Trade Imbalance

The Indian Ocean trade had been a major component of the Mughal economy since the sixteenth century. Indian textiles, particularly the fine muslins of Bengal, the calicoes of Gujarat, and the silks of the upper Doab, were exported in major quantities to Southeast Asia, the Middle East, and Europe. The Indian Ocean trade brought significant revenues to the Mughal treasury through customs duties, and the trading cities of Surat, Cambay, Ahmadabad, and Hooghly were major centres of commercial activity.

The trade balance of the Mughal empire shifted in the late seventeenth and early eighteenth centuries. The considerable expansion of the European trading presence in the Indian Ocean, particularly the British and the Dutch East India Companies, captured an increasing share of the maritime trade, and the indigenous merchant communities of Gujarat, the Coromandel coast, and Bengal were progressively subordinated to European commercial capital. The European reorientation of the bullion trade, examined in the economic decline of the Mughal Empire page, was a major factor in the disruption of the Indian Ocean trade.

European Drain of Wealth

The European drain of wealth from India is one of the most discussed themes in the economic history of the late Mughal period. The British East India Company, after the grant of the diwani of Bengal in 1765 examined in the Diwani of Bengal page, acquired the fiscal resources of three of the richest provinces of the former Mughal empire, and the major transfer of wealth from India to Britain was a major event in the economic history of the early modern world. The deindustrialisation of the Indian textile industry in the nineteenth century, examined in the economic decline of the Mughal Empire and the colonial Mughal legacy pages, was consequences of the European drain.

The European drain of wealth was a major factor in the economic decline of the Mughal empire, and the significant debate about the magnitude and the consequences of the drain is examined in the relevant pages. The connection between the drain and the broader decline of the Mughal Empire is treated in the relevant cluster pages.

The Disruption of the Textile Industry

The Indian textile industry was a major sector of the Mughal economy, and the major disruption of the industry in the late Mughal period was a major factor in the economic decline of the empire. The disruption was caused by several factors, including the war and political fragmentation of the late seventeenth and early eighteenth centuries, the European reorientation of the textile trade, and the considerable disruption of the indigenous trading networks. The deindustrialisation of the Indian textile industry in the nineteenth century, examined in the economic decline of the Mughal Empire page, was a major event in the economic history of the period.

The cultural inheritance of the Indian textile industry, including the major traditions of the muslins of Bengal, the calicoes of Gujarat, and the silks of the upper Doab, is a major feature of the cultural inheritance of contemporary India and Pakistan. The connection between the disruption of the textile industry and the broader economic decline of the Mughal empire is examined in the relevant cluster pages.

The Financial Cost of the Deccan Wars

The twenty-five years of Aurangzeb’s Deccan campaigns, from 1681 to 1707, placed an enormous strain on the imperial treasury. The conquest of the sultanates of Bijapur and Golconda required the maintenance of large armies in the Deccan for extended periods, far from the revenue-producing centres of north India. The cost of these campaigns has been estimated at a significant fraction of the total imperial revenue over the relevant period, and the campaigns were funded in part through extraordinary measures, including the imposition of special taxes, the borrowing from the major banking houses of the empire, and the diversion of revenue from the northern provinces.

The longer-term consequence of the Deccan wars was the disruption of the agricultural economy of the Deccan plateau, the displacement of considerable populations, and the destruction of urban centres that had been the basis of the regional economy. The Maratha campaigns of the late seventeenth and early eighteenth centuries produced a similar pattern of disruption in the western Deccan, the Khandesh, and the upper Doab. The financial cost of the Deccan wars and the Maratha campaigns was a major factor in the fiscal crisis of the late Mughal empire.

The Disruption of the Silver Supply

The silver for Mughal coinage came principally from the New World trade, which had, since the late sixteenth century, brought large quantities of American silver through European trading companies to the Indian Ocean. The availability of this silver supported a major expansion of the money supply in the early seventeenth century, and the price level rose significantly between Akbar’s reign and Aurangzeb’s. The European reorientation of the bullion trade in the late seventeenth and early eighteenth centuries, examined in the economic decline of the Mughal Empire page, was a major factor in the disruption of the silver supply, and the disruption contributed to the monetary and fiscal crisis of the late Mughal period.

The Role of Climate Change: The Little Ice Age

The role of climate change in the decline of the Mughal empire has been the subject of significant historical debate. The Little Ice Age, a period of global cooling that lasted from the fourteenth to the nineteenth centuries, had considerable effects on the climate of the Indian subcontinent, including a reduction in the monsoon rainfall and a corresponding reduction in the agricultural productivity of the region. The connection between the Little Ice Age and the major famines of the late Mughal period, including the Chalisa famine of 1630–1632 and the Bengal famine of 1770, is examined in the economic decline of the Mughal Empire page.

The role of climate change in the decline of the Mughal empire is a major theme in the recent scholarship on the Mughal period, and the major connection between the climate history of the period and the political and economic history of the empire is examined in the relevant cluster pages. The Little Ice Age was a major factor in the agrarian crises of the late Mughal period, and the connection to the broader decline of the Mughal Empire is treated in the relevant pages.

The Impact of the Famines

The major famines of the late Mughal period, examined in the economic decline of the Mughal Empire page, had significant effects on the population, the agrarian economy, and the fiscal system. The famines killed considerable portions of the population, disrupted agricultural production, and contributed to the fiscal crisis of the late empire. The most significant of the late Mughal famines was the Bengal famine of 1770, the Chiyattorer Manvantar, which is estimated to have killed as many as ten million people. The connection between the famines and the broader decline of the Mughal Empire is examined in the relevant cluster pages.

The Legacy

The legacy of the economic factors in the decline of the Mughal empire is major. The cumulative effect of the various economic crises was to undermine the fiscal basis of the imperial state and to prepare the ground for the British conquest. The rise of the Marathas, the rise of the Sikh power, and the British East India Company’s expansion all had major economic dimensions that complemented their political and military significance, and the rebellion of 1857 can only be understood in the context of the long economic crisis of the late Mughal period. The broader context of the economic factors in the decline is examined in the economic decline of the Mughal Empire page and in the Mughal decline overview, and the connection to the Mughal administration overview and the Mughal history overview is treated in the relevant pages.

Sources

• Irfan Habib, The Agrarian System of Mughal India (1963; rev. 1999), ch. 12.