Last week, US President Donald Trump shocked the world economy with his ‘Liberation Day’ tariffs on practically every country, defying economists. History tells us, again and again, that low taxes are better for consumers and producers. This is a lesson that many medieval Indian rulers learned—sometimes from painful experience.
Importance of trade
International trade was extremely important to premodern Indians. It was the best way to get luxury goods, used both by court connoisseurs and in temple rituals. Take, for example, the Chola kingdom of medieval Tamil Nadu (850–1279 CE). Archaeological excavations have found sherds of imported Chinese porcelain both in the royal temple of Darasuram and the imperial palace at Gangai-konda-Chola-puram. Many substantial books have explored the global trading connections that brought in these goods, most recently William Dalrymple’s The Golden Road (2024).
But global trade depends on internal economic integration. In premodern India, this could never be taken for granted, owing to incessant regional warfare as well as a host of petty tariffs.
In some cases, these tariffs were necessary to ensure the safe transit of goods. Take, for example, the commercially inclined Chaulukya kingdom of Gujarat (c. 940–1244 CE). Historian Pushpa Prasad, in her translation of the Lekhapaddhati (a compilation of medieval documents), notes that in the kingdom, “merchants had to pay taxes such as road-tax, toll and excise, and also had to obtain permits, certificates, and transit clearances” as they moved from town to town.
In ports, foreign merchants had to pay both import and export tax. But in return, court documents ordered officers “not to harass people, to maintain good behaviour, and not collect more money than authorized from foreign merchants, the Banjāras [nomads] and itinerant traders.” So, while moving goods around wasn’t cheap, Gujarati merchants could do it in relative safety, guaranteed by royal officers.
South India, on the other hand, had a more turbulent story with trade. In the early Chola period, power at the local level was exercised by assemblies of peasants and priests. These bodies insisted on using their own weights and measures, levied tolls, and taxed everything from goats to oil and cloth. At the same time, they rarely offered security to traders.
In response, merchants armed themselves, formed regional corporations, lobbied royals, and hired mercenaries. While this ensured the trade of luxury goods, the trade in commodities remained fairly local.
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Dangers of high tariffs
In the late 11th century, however, Chola emperor Kulottunga I (r. 1070–1122) radically changed policies. Economic historian Kenneth R Hall studied these in Trade and Statecraft in the Age of the Cholas (1980). First, Kulottunga abolished all commercial tolls, allowing goods to flow freely. Second, he issued a flood of low-denomination copper coins. Third, he ordered that agrarian taxes had to be paid in cash, not in kind. Encouraged, village assemblies began to set up their own markets. Farmers came there to sell their produce and used the coin to buy affordable necessities. This improved the circulation of commodities, leading to a minor boom in manufacturing centres such as Kanchipuram. In its heyday, Kanchipuram textiles were worn across the Eastern Indian Ocean.
Unfortunately, things went downhill after Kulottunga’s reign. Kanchipuram’s wealthy, sedentary weavers were only too easy for medieval politicians to tax. They had to pay four separate taxes on different kinds of looms, plus a royal tax at every stage of the manufacturing process: on cotton purchases, on spun yarn, on woven cloth, and on cloth sales. Unsurprisingly, skilled weavers emigrated in search of better opportunities, as seen in various inscriptions recorded in the Annual Reports of South Indian Epigraphy (1920).
As with manufacturers, so with importers and exporters. Further north along the coast, the port of Motupalli had become fairly prominent in the 13th century. But, in a tale old as time, the politicians got greedy. An absurd tax was levied on childless merchants; restrictions were imposed on merchants’ movement and purchases; tariffs on gold, silver, and sandalwood were raised.
In response, writes historian Kanakalatha Mukund in The Trading World of the Tamil Merchant (1999), merchants simply boycotted the port. The local politician, quite abashedly, got rid of all these tariffs in 1358. Only then did the merchants return.
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Benefits of low tariffs
How, then, did India become a juggernaut of world trade by the 1500s–1600s? The answer varies by region, but in South India, it was because an entente was worked out between manufacturers, importers/exporters, and the State. Historian Noboru Karashima studied this in Towards a New Formation: South Indian Society under Vijayanagara Rule (1993).
After a few missteps, the Vijayanagara Empire, which ruled the Tamil coast, remitted swathes of taxes, especially on weavers and oil-pressers. Taxes on luxury goods were also relaxed, especially if they were used in temples. Merchants were allowed to collect their own taxes. All this made temple towns roaring demand centres, allowing for profitable imports—while creating valuable goods for export. This was so successful, writes Mukund, that even in inland Salem, markets sold imported “camphor, silk yarn, coral and copper” (Trading World).
So, what can we learn from all of this? At least in medieval India, restricting the flow of goods and wealth only led to the emigration of skilled workers and traders. On the other hand, when premodern States sought long-term development over short-term profiteering, demand was stimulated, manufacturers grew wealthier, and merchants cooperated. It’s impossible not to see a parallel to the present. History, as it continues to rhyme over the centuries, shows us that politicians never learn.
Anirudh Kanisetti is a public historian. He is the author of ‘Lords of Earth and Sea: A History of the Chola Empire’ and the award-winning ‘Lords of the Deccan’. He hosts the Echoes of India and Yuddha podcasts. He tweets @AKanisetti and is on Instagram @anirbuddha.
This article is a part of the ‘Thinking Medieval‘ series that takes a deep dive into India’s medieval culture, politics, and history.
(Edited by Prasanna Bachchhav)