The changes in the agrarian economy introduced in the Gupta period have been already noted in the section on administration. The most important innovation in the agricultural sector was the introduction of land grant economy. Initially, religious donees were exempted from payment of revenue (land-tax) and later received administrative judiciary rights over the villages. However, economic advantages of land-grant donated to religious specialists like Brahmanas were more important than the royal act of giving away since land to brahmanas and later officials. The astronomical knowledge of brahmanas in agricultural seasons, calendar, and agricultural manners brought considerable amount of land under cultivation. Thus, historians like R.S. Sharma have accepted the phenomenon of agrarian expansion for early medieval India. Krishiparaghara (agricultural manual) gives vivid descriptions of fields, and agricultural operations of this period.
Although revenue-free land grants to religious and secular donees did not bring immediate revenue to state these grants initiated rural prosperity and bound villages in a wider economic network. If the land donated to brahmanas was wasteland or forest, the grantee took the initiatives of introducing agriculture. This was especially true of forest and tribal areas. Brahmanas possessed technical and astronomical knowledge of agricultural operations.
One of the most important socio-economic changes was ‘peasantization’ of tribes in central Indian belt Orissa, Assam, part of western and southern India. As the brahmanas donees arrived in the forests and hills of tribal India, they began to initiate a section of the tribal society into agricultural activities. The process brought two economic advantages to state and society. More cultivable land was brought under agriculture generating more revenues for the expanding rural society and meeting increasing revenue demands. The part of the tribal society offered its labour for agriculture, forest and rural law and order, mining operations of public work in villages etc.
State revenue was derived from a variety of taxes from the land and from trade. The debasement of the later Gupta coinage has been interpreted as recording a fiscal crisis. Harsha divided the income of the state into four as mention by Xuan Zang (Hiuen-Tsang)– quarter for government expenses another quarter for the salaries of public servants, a third quarter for the reward of intellectual attainments, and the last quarter for gifts.
It has been argued that there was decay in urban centers at this time, pointing to the Gupta period economy having feudal characteristics. Town not only declined, but many suffered a visible termination of commerce. Excavation levels of the Kushana period show a prosperous condition. The insufficiency of agricultural produce to maintain towns has been attributed to climatic change, with increasing desiccation and aridity of the environment. A decrease in rainfall and the ill effects of deforestation would also have affected agricultural production. A combination of these changes would have contributed to urban decline. However, the crucial question remains if this urban decline was sub continental or restricted to certain regions. It is important to note that some town certainly declined, but it was not a sub continental phenomenon and the reasons for decline varied. Apart from other environmental changes there may have been other economic changes. The rise of new centers of exchange may have re-routed trade routes. New towns sprang up in the eastern Gangetic plain while Kanyakabja (Kanauj) continue to flourish as town with a prosperous agrarian hinterland. Paunar in the Deccan flourished during the Vakataka period. Valabhi grew in commercial importance through the trade of the Arabian Sea in which affluent Arab traders were involved. The Indian merchants had become more assertive in central Asia and south-east Asia. In some parts of the sub continent the Gupta age was the concluding phase of the economic momentum that began in the proceeding period. In other parts, the sixth century witnessed emergence of new groups of merchants on the west coast.
Sources of commercial wealth consisted of the produce from mines, plants and animals converted to items through craftsmanship. Gold was mined in Karnataka but panned in the mountain streams of the far north. The high quality craftsmanship in gold is evident in the superbly designed and meticulously minted Gupta coins. They tend to be found in hoards and some are in mint conditions. High-value silk, and a farmillier weight standards facilitated commerce. The mining of copper and iron continued, being used for household items, utensils, implements and weapons. Among the most impressive metal objects of this period is the pillars of iron, now located at Mehrauli in Delhi, reacting a height of just over 23 feet and mode of a remarkably fine metal which has scarcely rusted. It carries an inscription referring to a kind called Chandra, identified by some as Chandra Gupta II. Equally impressive is the life-size, copper statue of the Buddha. Ivory works, pearl fisheries of western India, cutting and polishing of a variety of precions stones-jasper, agate, carnelian, quartz, lapis-lazuli and bead-malling of Ujjain and Bhokardan continued to flourish. The manufacture of various textiles had a vast domestic market dominating north-south trade within India, and there was also considerable demand for Indian textiles in Asian markets. Silk, muslin, Calico linen, wool and cotton were produced in quantity, and western India was one of the centres of silk weaving. However in the latter half of the Gupta period the production of silk may have declined, since many members of an important guild of ill-weavers in western India migrated inland to follow other occupations. Guilds continued to be vital in manufacture of goods and in commercial enterprise and had their own laws regarding their internal organization. The guilds provided socio-economic support in some ways parallel to that of jati. The excessively high rates demanded in earlier times on loans for overseas trade were reduced to a reasonable twenty percent, indicating a confidence in overseas trade. The lowering of the rate of interest also indicates the greater availability of goods and a possible decrease in rate of profit.
The campaigns of Samudra Gupta to the east and the south, and the repeated tours of Harsha, world have required efficient communication and movement of goods. Ox-drawn carts were common on the roads and pack animals were used on rough terrain and elephants in heavily forested areas. The lower reaches of large rivers such, as Ganges, Narmada, Godawari, Krishna and Kaveri were the main waterways. The ports of the eastern coast, such as Tamralipti and Ghanta Shala, handled the northern Indian trade, with the eastern coast and south-east Asia and those of the west coast traded with the eastern Mediterranean and western Asia. The ports and production centres of peninsular India that were involved at this maritime trade appear not to have declined at this time, but these were outside Gupta control nor had the overland trade with central and west Asia declined between the fourth and the seventh centuries. There appears to have been appreciable rise in the import of horses, coming from Iran and Bactria centres in north-west India, or from Arabia by sea to the western coast.