There are three schools of thought about the origin of the Paramara clan.The most widely accepted school of thought is that the Paramaras – along with the Chauhans, the Pratiharas (Parihars) and the Solankis (Chalukyas) – were one of the four Agni kula ("fire-born") clans of the Rajputs. In a second school of thought, the Paramara clan is said to have been a tribe of central India that rose to political prominence as the feudatory of the Rashtrakutas. In a third school of thought, the Paramara clan is said to have originally been an inseparable part of the Rashtrakutas, which later branched out from the Rashtrakutas (Rathore)and declared themselves to be a distinct Rajput clan.
Whatever the origin, the Paramaras established themselves as the rulers of Malwa in central India in the ninth century, ruling from their capital at Dhar. In this situation, the Paramaras enjoyed great political power and clout in ancient India. The Paramaras ruled until 1305, when Malwa was conquered by Ala ud din Khilji, the Khilji Sultan of Delhi. It was during these medieval times that their political power and clout started diminishing.
Political power was greatly reduced further still during the consolidation of the British Empire in pre-independence India, with the royals of this clan cooperating with the British conquerors. After India gained independence from Britain in 1947, the Paramara royalty acceded their political powers to the central Indian government in New Delhi. In lieu of these surrendered powers, the Paramara royals received generous financial grants, called the "Privy Purse", from the central government, which helped them to maintain a lavish style of living, as well as maintaining the general upkeep of royal palaces, forts and other architectural marvels. This Privy Purse was later abolished by the central government, under the direction of Indira Gandhi. The Paramara royalty became increasingly complacent and did not adjust to the new political mechanisms of the emerging democracy, although the traditional support of ordinary Rajputs was maintained.
Both royal and ordinary Paramaras eventually fell behind other castes in economic development. By the mid-1980s, an economic, developmental and political gulf had emerged between them and other castes, and so Paramaras began focusing on careers in government. However, the liberalization of the Indian economy in the 1990s saw less government involvement in economic affairs. Merchant, intellectual and scheduled castes continued to thrive by moving into entrepreneurship, but not so the martial caste of the Rajputs. While some few have managed to gain in-roads into the contemporary political system, most Paramaras in general hold very little political power or clout.