Those who insist on literacy as a test and insist upon making it a condition precedent to enfranchisement in my opinion, commit two mistakes. Their first mistake consists in their belief that an illiterate person is necessarily an unintelligent person … Their second mistake lies in supposing that literacy necessarily imports a higher level of intelligence or knowledge than what the illiterate possesses.Dr. B. R. Ambedkar in his memorandum to the Simon Commission (1928)
The irony is that these were the words of one of the most educated Indians, if not the most, of his time, and probably give us a fair idea about Bhimrao Ramji Ambedkar’s insight and understanding about the ground realities of India despite getting his education in some of the most elite universities of the world. Babasaheb Ambedkar, as he was fondly called, is mostly remembered for his unparalleled contributions as the Chairman of the Drafting Committee for the Constitution of India. He is widely acclaimed as the chief architect for many of the progressive provisions of the Constitution for which he made some of the most articulate and impassioned arguments in the Constituent Assembly. Dr B R Ambedkar was one of the greatest intellectuals of his time with his well-known contributions as a legal luminary, scholar, journalist, educationist, and social reformer. He emerged as a symbol for the downtrodden and backward masses and championed the cause of human rights. However, there is widespread ignorance with respect to Dr Ambedkar’s seminal work as a distinguished economist, which is surprising at best and unfortunate at worst.
Dr Ambedkar was one of the early Indians to undergo formal higher education in the subject of economics. He pursued his PhD in economics from Columbia University in the year 1917 and later was awarded his DSc in economics by the London School of Economics in 1921. He used his training as an economist to study the social maladies prevailing in India at that time and his deep understanding of India’s economic problems was reflected in his stimulating speeches and statements. His analysis was incisive and used to be accompanied by pragmatic policy solutions with a focus on the welfare of the people at large. This article delves into Dr Ambedkar’s contributions in the fields of monetary economics, public finance, agricultural economics, economic dimensions of caste system and untouchability, and his strategies for the overall economic development of India. I would also try to bring out the contemporary relevance of Ambedkar’s ideas with respect to the various dimensions of the Indian economy.
Contributions in Monetary Economics
Babasaheb’s understanding of the monetary system is evident from his monumental book, The Problem of Rupee: Its Origin and Solution, written as part of his DSc dissertation. He even presented his arguments in front of the Hilton Young Commission which were taken into account while forming the Reserve Bank of India (RBI). The debates on gold standard versus gold-exchange standard were raging during that time and Ambedkar opposed one of the most prominent economists of those times, John Maynard Keynes. Ambedkar argued in favour of a modified gold standard while Keynes was a votary of gold-exchange standard. Ambedkar’s basic argument was that the gold standard provided some sort of stability in the currency for a developing country like India and was against the idea of money supply being linked to gold. He emphasised the importance of price stability over exchange rate stability for the larger benefit of the poor people. Another point of contention for him was that the gold-exchange standard left the discretion of the issuer of the currency totally unregulated and gave unbridled powers to the government. Thus, he suggested that a law be framed to fix the ratio between the gold coin and rupee, and that the former should not be mutually convertible (Jadhav 1991).
Even though the context in which these suggestions were given by Babasaheb has completely altered, it is intriguing that till date we hear the constant tussle between the Government and the Reserve Bank of India with respect to the latter’s independence. RBI’s adoption of the monetary policy framework in 2013 is also instructive of its priority for price stability, of which Dr Ambedkar was himself a votary.
Contributions in Public Finance
Another seminal work of Ambedkar was his PhD dissertation, The Evolution of Provincial Finance in British India, which dealt with the financial relationship between the Centre and province. Ambedkar unmistakably stated that the each administrative unit should be given powers to raise its own finances and plan its expenditures without being heavily dependent on another. Till 1871, the provinces were the main administrative units but they were only allowed to plan for their expenditures while being dependent on the Centre for the revenues. This created an imbalance in the finances of the State and led to rising fiscal stress. Subsequent systems were developed like ‘budget by assignment’, ‘budget by assigned revenues’, and ‘budget by shared revenues’ to address the Centre-provincial fiscal relationship that carried on for close to five decades (Jadhav 1991).
Ambedkar’s was a pioneering work in the field of public finance and his detailed and objective analysis provided an insight into the Centre-State financial relationship. His study has also provided a base for the modern-day relationship between the Centre and States and is an underlying guiding light for the Finance Commissions for many years in independent India.
Ambedkar was also instrumental in moving a bill in 1937 to abolish the Khoti system prevalent during that time. Under this system, the British used to appoint middlemen to collect taxes from the people and deposit them with the government. These middlemen, known as Khots, were a source of exploitation and abuse for the ordinary people. Ambedkar is also known to have given principles for spending of public fund and these are known as ‘Ambedkar’s Canons of Public Expenditure’. These are the principles of ‘faithfulness, wisdom, and economy’ with respect to the spending of public fund by the government (Kumar 2019).
Contributions in Agricultural Economics
In order to address the problem of low productivity of land in Indian agriculture, a committee was appointed in 1917 and it suggested that land holdings should be consolidated. Ambedkar in his paper, Small Holdings in India and their Remedies (1918) argued that the consolidated land should be state-owned and equally distributed to the original cultivators without any discrimination (Ambedkar 1918). He argued that land was only one of the factors of production and for efficient use of land it is essential to look at other factors like capital and labour (Kumar 2019). The lack of capital and excess labour were equally problematic and for this Ambedkar suggested collective farming and industrialisation as possible remedies. The former would improve productivity while the latter would address the problem of disguised unemployment and increase the stock of capital (Bhattacharya 2016).
In a way, the genius of Ambedkar led him to talk about the issue of surplus labour almost three decades prior to Nobel Laureate Arthur Lewis who would develop his dual economy model only in the 1950’s. Unsurprisingly, the issue of land reforms in India is still a contentious one and finds a mention in the manifestos of political parties for each election since decades but is still an unfulfilled objective.
Economic Dimensions of Caste System and Untouchability
…in his magnum opus, Annihilation of Caste, [Ambedkar] derided such theories through logic and pointed out that such[caste] systems were based more on the ‘division of labourers’. He pointed out that the caste system is responsible for assigning the occupations of different people and this hinders the mobility of capital and labour which in turn leads to an impeding economic development…
During Ambedkar’s time, the justification for the ‘varna’ system using the theory of division of labour and occupational theory was at its peak. Ambedkar in his magnum opus, Annihilation of Caste, derided such theories through logic and pointed out that such systems were based more on the ‘division of labourers’. He pointed out that the caste system is responsible for assigning the occupations of different people and this hinders the mobility of capital and labour which in turn leads to an impeding economic development of the country. While economic growth is an outcome of change, the caste system perpetuates the same socio-economic system thereby negatively affecting the productivity of the economy. Ambedkar was also a vehement critic of untouchability and considered it an economic system worse than slavery. In What Congress and Gandhi Have Done to the Untouchables (1945) he states, ‘Untouchability is not only a system of unmitigated economic exploitation but is also a system of uncontrolled economic exploitation’ (Ambedkar 1945).
Against the hope that with time and ‘modernity’, the factor of caste would dissipate, we are now seeing the strengthening of the symbol of caste identity on the contrary. In addition to the politics of vote bank that can be considered as one of the reasons for such caste mobilisation, another important factor is the discriminatory policies of successive governments leaving the most marginalised castes at the bottom of the economic and social ladder.
Strategies for Overall Economic Development of India
Dr Ambedkar agreed with Marx’s views on exploitation of the masses and believed that the path for India’s economic development should be through eradication of poverty and inequalities, and an end to exploitation by the rich (Stephen 2017). However he did not endorse communism as an economic system. In his essay, Buddha and Karl Marx, he points out that economic motive cannot be the sole reason for all human activity as formulated by Marx and therefore the resultant exploitation can also be religious or social, especially in India. Ambedkar was an ardent supporter of democracy and human rights and therefore did not accept the tendencies of dictatorship and anarchy in communism. He advocated reformation within the tenets of the constitution and therefore rejected Marx’s idea of a stateless society. Ambedkar favoured state’s role in driving the economic development of the country as opposed to the totalitarian approach of Marx (Jadhav 1991).
It is evident that Dr B R Ambedkar was an economist par excellence. He had pragmatic solutions to complex problems and always kept the welfare of people at the centre of his policies. He pushed for labour welfare in the Constituent Assembly and also advanced the idea of including both positive rights and negative rights under the tenet of Fundamental Rights in the Constitution of India. However, not many people shared the radical and reformist beliefs of Dr Ambedkar and therefore, many of his ideas were incorporated in the non-justiciable Directive Principles of State Policy instead. His policy position was based more on empirical evidence, historical foundations, and real world examples rather than confined to certain principles or ideology (Bhattacharya 2016). On one hand, Babasaheb advocated for collective farming while on the other he also pushed for rapid industrialisation. While being a votary of urbanisation, Ambedkar warned against the perils of unfettered capitalism and advocated for key industries and agriculture to be state owned in order to save the masses from exploitation (Singariya 2013). It is indeed a loss for the field of economic policymaking as a whole that his ideas and vision did not get due recognition. His contributions to such diverse fields of economics are a testimony to his greatness and intellect.
(Ayush Mehrotra is a Master of Public Policy (MPP ‘21) candidate at the National Law School of India University, Bengaluru. He has a Bachelor’s degree in Economics from the University of Delhi. Ayush is interested in exploring policies at the intersection of political economy, governance, and institutional design. He can be reached at email@example.com)
Ambedkar, B R. 1918. “Small Holdings in India and their Remedies.” Journal of the Indian Economic Society. — 1945. What Congress and Gandhi have done to the Untouchables. Bombay: Thacker.
Bhattacharya, Pramit. 2016. The economics of Ambedkar. April 9, 2016. https://bit.ly/2WUkGOD (accessed April 24, 2020).
Jadhav, Narendra. 1991. “Neglected Economic Thought of Babasaheb Ambedkar.” Economic and Political Weekly 26, no. 15: 980-982.
Kumar, Sunil. 2019. “Ambedkar’s Economic Ideas & Contributions.” IOSR Journal Of Humanities And Social Science 24, no. 3: 50-54.
Singariya, M R. 2013. “Dr. B.R. Ambedkar: As an Economist.” International Journal of Humanities and Social Science Invention 2, no. 3: 24-27.
Stephen, Cynthia. 2017. Ambedkar’s ‘enlightened economics’. June 15, 2017. https://bit.ly/2Xo1aZQ (accessed April 24, 2020).