Politics, particularly in India, has tended to eclipse the brilliance of academicians. In the current context, there is no example better than that of Dr.B.R. Ambedkar who was an economist par excellence. He was one of the two luminaries who succeeded simultaneously in making the discipline of finance both scientifically sound and operationally meaningful, while adding to it lot of literary flavour to attract academic interest in an otherwise dull area of study. The other academician was Dr Hugh Dalton of the London School of Economics who, migrating to politics, came to serve as Chancellor of the Exchequer in Britain’s Labour Government after the historic general elections of 1945. A premature budget leakage, however, brought him back to the pavilion. Dr. Ambedkar had moved to politics via law, and was at the crease as Labour Member in the Viceroy’s Executive Council for four years (1942-46) and as Minister for Law for another four years (1947-51) in the Government of India after independence. During of Political Economy for two years (1918-20). But London was still calling the young economist who, after supplementing his savings with funds from some other sources, accomplished the near-impossible task of writing three dissertations within three years (1920- 23). The first one on ‘Provincial Decentralization of Imperial Finance in British India’ was completed in 1921 for his M.Sc. degree. The second one on ‘The Problem of the Rupee: Its Origin and its Solution’ was submitted in 1922 for his D.Sc. degree to London University. Not satisfied with all this, the academic entrepreneur in Ambedkar impelled him to seek further enlightenment in Germany (University of Bonn), the land of hardboiled economists, thus following a route reverse to that adopted by Karl Marx. The Indian economist’s stay there (1922-23), though cut short by an urgent call from Professor Cannan of the London School of Economics (seeking a revision of his D.Sc. thesis without changing its conclusions), saw the practical vindication of an anti-inflation thesis at a
Dr. B.R. Ambedkar was an economist par excellence who succeeded simultaneously in making the discipline of finance both scientifically sound and operationally meaningful, while adding to it a lot of literary flavour to attract academic interest in an otherwise dull area of study. But very little is known about this part of his genius.
the brief interlude (1946-47), he returned to academics for a while, bringing out a Bombay reprint (1947) of his London classic (1923), as also his own model constitution for the proposed “United States of India”. However, his desire to bring out Volume II of the ‘History of Indian Currency and banking’ as an UpToDate supplement to ‘The Problem of the Rupee’ (after 1923) remained unfulfilled. Having graduated from the university of Bombay in 1912, Bhimrao Ramji Ambedkar sailed for America in 1913 with financial support from the Maharaja of Baroda. Within three years (1913-16), he was able to complete two dissertations at Columbia University. ‘Ancient Indian Commerce’ (1915) for his M.A. degree and ‘National Dividend in India: A Historical and Analytical Study’ (1916) for his Ph.D. degree.
His thrist for knowledge unquenched, the young Bhimrao reached London in 1916, seeking admission simultaneously to Gray’s Inn for Bar-at-Law and to the London School of Economics for further research. He wrote to the Maharaja of Baroda soliciting help for higher studies. Such permission being refused, he returned to India in 1917 to serve Baroda state under the bond executed for procuring financial assistance. But Ambedkar’s heart was with academics and he soon moved to Sydenham College of Commerce and Economics in Bombay where he served as Professor time when as many as eleven trillion marks were required to buy one pound!
Ambedkar returned to Bombay (via London) and submitted a modified text of his thesis on ‘The Problem of the Rupee,’ somewhat softer for the examiners to swallow. The revised version was, readily accepted for the D.Sc. degree by the London School of Economics, and published the same year (1923) by P.S. King & Son Ltd, London.
Within two years, another monumental work entitled ‘The Evaluation of Provincial Finance in British India: A Study in the Provincial Decentralization of Imperial Preference’ was brought out by the same publisher in London (1925). By that time, Ambedkar had risen to the top echelons as a qualified economist of Indian origin. But law and politics took most of his time over the next three decades except for a breathing spell during 1946-47 when he got his D.Sc. thesis reprinted. Yet, he was able to contribute to economic thinking through a score of books, such as ‘Small Holdings in India and their Remedies,” “Federation vs Freedom’, “States and Minorities’, and ‘Annihilation of Caste’ (edited by Mulk Raj Anand in 1990), besides his intellectual perceptions incorporated into the Constitution as enforced in 1950.
While prefacing The Problem of the Rupee’, Ambedkar crossed swords with J.M. Keynes, Britain’s prophet economist, as follows:
“On the theoretical side, there is no other book except that of Professor Keynes which makes any attempt to examine its scientific basis. But the conclusions he has arrived at are in sharp conflict with those of mine. Our differences extend to almost every proposition that he has advanced in favour of the exchange standard, this difference proceeds from the fundamental fact which seems to be overlooked by Professor Keynes, that nothing will stabilize the rupee unless we stabilize its general purchasing power. That exchange standard does not do. That standard concerns itself only with symptoms and does not go to the disease: Indeed, on my showing if anything it aggravates the disease,”
Edwin Cannan, in is foreword, criticized Ambedkar, but accepted the latter’s originality and practical wisdom as follows:
“I do not share Mr. Ambedkar’s hostility to the system, nor accept most of his arguments. But he hits some nails very squarely on the head, and even when I have thought him quite wrong, I have found a stimulating freshness in his views and reasons. An old teacher like myself learns to tolerate the vagaries of originality even when they resist severe examination such as that of which Mr. Ambedkar speaks. In practical conclusion, I am inclined to think he is right.”
Taking the period 1875-76 to 1891-92 as a case in point, Ambedkar expressed concern at the depreciation in the external value of rupee – from 21.63 pence to 16.73 pence. About the same time, as he noted, India’s sterling debt and rupee debt roughly grew three-fold and two-fold, respectively. History would appear to have repeated itself after some one hundred years. The rupee cost of one dollar rose from Rs 7.86 in 1980 to Rs 18.13 on November 30, 1990, while that of the pound sterling went up from Rs 18.29 to Rs 35.07 during the same period. The (overall) ET/NEER Index of the Indian rupee fell from 96.10 in 1981 to 45.62 (less than half) in 1989. The rupee burden of India’s external debt is estimated to have gone up from Rs 1,02,592 crores on December 31, 1988 to about Rs.1,25,000 crores on November 30, 1990 largely due to exchange depreciation. As such, Ambedkar’s thesis propounded some seventy years back is crucially valid today: First, that inflation at home is bound to erode the external value of rupee; and, secondly, that such depreciation which bolsters the rupee burden of foreign debt is not in India’s national interest.
Dr. Ambedkar’s treatise on ‘Provisional finance’ started with an invigorating preface: “For a long time to come students will be saved the conventional humiliation of making an apology for presenting a study of Indian Finance or Economics.” It was supported by a powerful foreword from the Colombia don, Edwin R.A. Seligman, who testified: ‘The problem discussed by Mr. Ambedkar in his excellent dissertation is one that is arousing a growing interest in all parts of the world.” Tracing the evolution of provincial finance in India, Dr Ambedkar identified three areas over a period of fifty years: (a) Budget by Assignment (1871-77); (b) Budget by Assigned Revenues (1877-82), and (c) Budget by Shared Revenues (1882-1921). The first period was associated with rigidity, since revenue assignments remained fixed whereas expenditure tended to grow, more so with the fall in the purchasing power of the rupee.
The second phase provided some scope of flexibility with better management of revenue realization under certain heads, on the part of provincial (state) governments. During the third stage a good many sources of revenue were wholly provincialized. Presenting a critique of the change, Ambedkar opined: “It is obvious that good finance; for, finance is the fuel of the whole administrative machine”. In fact, his book formed the cornerstone of federal finance in India.
To him, finance was not mere arithmetic; it was a great policy leading ultimately, in 1950, to the constitutional provision of the quin-quennial Finance Commissions and the emergence of the Gadgil Formula (sought to be revised again in 1990). Dr Ambedkar, in his own model Constitution, had dreamt of a socialist structure based, inter alia, on: (a) nationalisation of all key industries; (b) nationalisation of all land, along with adoption of collective farming, particularly for the benefit of the landless rural population; and (c) state monopoly of insurance, with compulsory life insurance for every citizen of India. But such a ginger approach could not be pushed through the Constituent Assembly even though Dr Ambedkar came to be Chairman of the Drafting Committee.
Inspire of his socialist manifesto, Dr Ambedkar did not favour an ostentation on austerity. In 1937, he criticized the then Bombay Government’s move to lower the salaries of ministers to just Rs 500 per month. As a member of the Legislative Assembly, he asserted that “nobody is going to be deceived by all these things”. He put forward four arguments favoring higher salaries: (a) Social standard; (b) competency; (c) democracy (with a sense of responsibility); and (d) integrity and purity of administration. Dr Ambedkar also implored the Government to give up the greed for revenue from excise on liquor. He pressed for implementation of the prohibition policy to save human beings from demoralization and to upgrade the quality of life.
Bhimrao Ambedkar can be compared, on the one hand, with Karl Marx, as a socio-politico-economic crusader and, on the other, with Lord Keynes, as a monetary and financial economist. None of these thinkers could complete the biblical life span of seventy years. The death of Marx coincided with the birth of Keynes, for whom Ambedkar was a younger contemporary. Marx moved from Germany to the UK and spent much time studying in the British Museum. Ambedkar, too, tried to get the best from this academic treasure, missing his lunch to save both time and money. But he moved from the UK to Germany for further enlightenment.
The USSR witnessed the first major challenge to Marx in 1985, followed by the collapse of many other Marxian systems (with China still a major exception) by 1989-90. The dream of Keynes to have an international currency is on the verge of partial fulfilment (with 1992 as the target-year for the unification of EC nations). But his doctrine of deficit financing, having brought misery to many developing and even developed countries, had fallen from grace even before the Marxian debacle. The theory of trickle- down, having virtually failed to ameliorate the socio-economic lot of the masses in spite of massive capital investment, met with the same fate. However, Ambedkar’s anti-inflation thesis is still valid and crucially relevant for the Indian economy.
In the days of Marx, there was no Nobel Prize at all. When Keynes and Ambedkar were writing, it did exist, but the discipline of economics was not covered by the same. The Nobel Prize for Economics came to be instituted as late as 1969… More recently, financial economic has come to be recognized as a separate sub-discipline, with Modigliani of MIT leading in 1985 followed by Markowitz, Miller and Sharpe – the three who shared the Nobel Prize of 1990. Ambedkar was, certainly, a formidable fore-runner on this score. (Financial Express, Dec. 24 & 25, 1990)
