XI - Price Movements and Fluctuations in Economic Activity (1860–1947)

Summary

The period 1860 to 1947 was one in which market activity in India appears to have changed substantially. The almost total isolation of local markets gradually disappeared. Improvements in inland transport tied together markets across the sub-continent to a degree previously unknown. At the same time, falling costs of ocean transport made possible a growth of world commodity trade in which the products of Indian agriculture played an important role.

Price data are among the tracks of these changes in market activity; hence our interest in them. This chapter begins with a short examination of price movements over the entire period, and then moves to a longer examination of the forces determining agricultural prices in India and of the changes in these forces which occurred during this period. Prominence is given to agricultural prices because of the share of the sector in the economy and because the changes in market structure which occurred in the second half of the nineteenth century were most important for the marketing of agricultural goods. The next sections cover the prices of non-agricultural commodities and export and import prices. Relative movements of agricultural and non-agricultural prices and the potential impact of such movements on income distribution are studied in the following section. The concluding section of the chapter considers how forces determining price movements may influence the level of economic activity. Discussion of price data and their deficiencies is presented in an appendix.