This chapter discusses the medieval Indian economic history before the Ghorian conquests of the late twelfth century. Global historical factors which appear to have contributed to the decline in prosperity of both areas include invasion by fresh waves of barbarian central Asian tribes; the closure of the silk-route through the Tarim basin and north-west India to the Arabian Sea, and the rise of Islam. The coastal areas of Gujarat and Coromandel remained within the network of maritime trade, and the conditions which obtained there differed from the increasing isolation and impoverishment of northern India. During this period, landholding became the chief basis of social and political status. There was an increasing fragmentation and hereditarization of local power under what has variously been termed 'the Samanta system' or 'Indian feudalism'. In urban life the fissiparous direction of Indian society was reflected in the proliferation jati (caste) groups and the increasing rigidity of the hold of brahmanical Hinduism and the varndsramadharm.

Until the reign of Sher Shah, the principal coin in circulation in northern India was the billon sikandari, a copper coin with a small silver alloy, which had developed out of the progressive debasement of the silver tanka of the Delhi sultans. While the rupee became the principal coin for commercial transactions and tax payments, the Mughals issued a gold coin, muhr of 169 grains troy. The prices of foodgrains may theoretically be the best index of the movement of the general price-level, because of the fact that in a mainly agrarian economy, these determine to a large extent the costs and prices of all commodities. In the experience of modern capitalist economies, the doubling of prices during the first sixty years of the seventeenth century and again the first fifty years of the eighteenth century, would hardly merit the designation of inflation. The income of the ruling class came from collection of taxes, mainly the land revenue.

The most decisive evidence of change in the economic life of northern India after the Muslim expansion is numismatic. The Chandra dynasty coins are important in suggesting a prototype for the broad-struck silver and gold issues of the Delhi and Bengal sultanates. The metrology of the new coinage is firmly Indian with no parallels in earlier Islamic coinage. The remonetarization of the economy might have occurred by the middle of the thirteenth century, for at this period the Suhrawardi shaykhs of Multan left assets of lakhs of tankas. In the monetary system of the Delhi sultanate a firm equation between gold and silver appears to have been established at 1:10. The existence of smaller moneys of account in the Delhi is demonstrated by Baranl's numerous references to dings and dirams. It is clear that the establishment of a trimetallic coinage in northern India in the thirteenth century was heavily dependent on the remittance of gold and silver from Bengal.