In a small pin factory in 18th-century Scotland, Adam Smith saw the secret to prosperity. One worker drawing wire, another straightening it, a third cutting — together, producing far more than they would have had each of them done all the tasks themselves. From that simple observation emerged The Wealth of Nations, published in 1776, a work that continues to shape how nations think about growth, markets and the role of the State. Two hundred and fifty years on, India stands at a moment Smith would have found fascinating: A vast, ambitious economy balancing State intervention and market dynamism, global integration and inward caution. What would he make of it?
Smith would recognise something familiar in India’s journey. He believed prosperity came from productivity — what people could produce through cooperation, specialisation, and exchange. India’s rise since 1991 reflects that logic. Markets expanded, entrepreneurs flourished, and millions entered a more connected economy. Digital public infrastructure — from payments to identity — has widened participation in ways Smith would not have anticipated but would certainly have appreciated. The spread of mobile connectivity and low-cost data has further deepened markets, bringing even small entrepreneurs into wider value chains.
At the heart of Smith’s thinking was the idea of the “invisible hand”— that individuals pursuing their own interests, within a framework of competition and justice, can promote the broader good. But this is not an iron law. The invisible hand works only when markets are open and competitive, and when rules prevent manipulation.
That is where Smith’s attention would turn to in India today.
Walk through any Indian city, and you see the energy of markets — start-ups, delivery networks, informal enterprises. But look closer, and unevenness appears: Dominant players in key sectors, regulatory systems that both enable and entangle, and a State that is at once facilitator and referee, and even a hindrance.
Smith was wary of such concentration. He warned that business interests, if unchecked, could work against the public by limiting competition. He would likely look askance at India’s growing corporate concentration and the proximity between big business and policymaking with concern — not because he opposed markets, but because he believed they must remain open. On trade, his verdict might be sharper.
Smith argued that nations grow richer by specialising and trading freely. India has embraced globalisation in services, but in manufacturing, it has turned more cautious — raising tariffs and protecting domestic production.
Smith would challenge this instinct. Protection may feel safe, but it militates against efficiency and innovation. India’s ambition to become a manufacturing hub cannot rest on shelter; it must rest on competitiveness and integration into global supply chains.
Yet Smith would also reject the idea of a minimalist State. He saw government as essential for providing public goods, building infrastructure, and ensuring justice. A functioning legal system and predictable regulation were central to growth.
India has made progress in infrastructure and digital systems, but institutional challenges remain — judicial delays, regulatory uncertainty, and compliance complexity. Contract enforcement and policy predictability, in particular, remain areas where improvement could significantly boost economic confidence. Smith’s benchmark of a “tolerable administration of justice” would still be evolving.
Then there is inequality — an issue to which Smith was more sensitive than he is given credit for.
He believed prosperity must be widely shared, warning: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” For Smith, this was not just moral but economic. Growth cannot sustain itself if most people are excluded.
India’s growth has lifted millions, yet divides remain — in income, education, and opportunity. For Smith, this would signal unfinished work: Prosperity must become more broad-based and inclusive. This links directly to jobs — the quiet fault line in India’s growth story.
Smith measured wealth by the productivity of labour. India’s challenge is not growth alone, but its nature – capital-intensive in parts, informal in others, and not broad-based enough. The division of labour — the engine of productivity — requires scale and organisation. India has achieved this in services. It has yet to fully achieve it in manufacturing, where the potential for large-scale employment remains under-realised.
Complicating that challenge is the emergence of Artificial Intelligence (AI). Smith would welcome AI’s potential to boost productivity, much as he celebrated specialisation in his time. In India, AI could transform sectors from agriculture to health care, improving efficiency, reducing costs, and opening new avenues of growth. But he would also be uneasy. As a critic of monopolies, he would be troubled by the dominance of large technology firms and the concentration of data and platforms. This resembles the market distortions he warned against.
He would also worry about distribution. If AI’s gains accrue mainly to owners of capital rather than workers, inequality could deepen. In India, where the challenge of employment is critical, AI risks weakening the link between productivity and broad-based prosperity.
Smith’s response would not be to resist technology, but to shape it — ensuring competition, preventing excessive concentration, and investing in human capabilities so workers can benefit.
A “Smithian” agenda for India would be clear: Open markets more confidently, simplify regulations, strengthen institutions, invest in education and health, and ensure competition remains central — even in emerging sectors like AI.
There is also a deeper irony in Smith’s legacy. Two hundred and fifty years after he wrote The Wealth of Nations, much of the world — including India — remains preoccupied with the poverty of nations: How to reduce it, how to make growth inclusive, how to ensure opportunity reaches the many and not just the few.
The true wealth of a nation lies not in its balance sheets, but in the well-being and productive potential of its people.
Duvvuri Subbarao is a former governor of the Reserve Bank of India. The views expressed are personal
