Ambedkar’s Contributions to Indian Economics


“Earlier I remarked that it was unfortunate for the economics profession that Ambedkar decided to ‘changeover from economics to law and politics’ as he remarked in the preface of the Indian edition of The Problem of the Rupee in 1947”, says Mr. S. Ambirajan

I am deeply touched by the honour bestowed upon me by the University of Madras to give the Ambedkar Memorial Lecture. I must at once state that I accepted this invitation only after considerable hesitation because I am by no means an expert on Ambedkar’s life, politics, legal and social writings, as well as his brilliant if chequered, career. However I have had some acquaintance with his writings in economics, and it is my intention to highlight a few aspects of his contributions to the study of Indian economics. Before I proceed, I wish to remark on one aspect of Ambedkar’s present status with which many of you may not agree. I am somewhat distressed to see that he is portrayed as a leader of the ‘dalit’ community and nothing else. Partly it is the fault of the Indian political leadership in the post-independent era. It succeeded in its effort to marginalise him politically. But equally it is the fault of the community itself for having projected him exclusively as its own leader. This led to the repercussion of other much inferior people propelled as leaders of other communities, and the result was that Ambedkar got equated on a politico-intellectual plane with regional pygmies devoid of any significant national presence. It is my conviction that in reality we have had only two major personalities who could be considered the founding fathers of modern India. Vallabhbhai Patel unified and organised whatever bits and pieces left of a brutally partitioned geographical entity into a nation state. Ambedkar provided the cementing framework in the form of a Constitution that gave the newly born state a measure of feasibility and stability. All the remaining leaders were mere bit-players in this great story of the building of our sovereign democratic republic. I may be wrong, but there is enough ground for suspicion that the present Indian political class which seeks to honour Ambedkar by awarding posthumous titles, instituting fellowships and other memorials, is doing all this, not for genuinely honouring the departed leader but with the very utilitarian-selfish motive of securing the votes of those in whom he tried to instill a sense of self-respect. I must also make another melancholy reflection that in these days when the minority communities are claiming affinity with dalits – no doubt with the intention of strengthening their electoral clout – it would be worthwhile to remember that they treated dalits as no better than the caste Hindus. Ambedkar wrote of his experiences: Although on conversion to Christianity, the husband had become liberal in thought “the wife had remained orthodox in her ways and would not have consented to harbour an untouchable in her house…I learnt that a person who is an untouchable to a Hindu is also an untouchable to a Parsi…a person who is an untouchable to a Hindu is also an untouchable to a Mohammedan” (XII, 677, 678, 685). There must be something in the Indian soil and ethos that despite the lofty ideals of all religions, in the social and human sphere, much barbarism prevails.

While Ambedkar achieved great things in life, especially in the national-political arena, it is a matter of regret that he did not pursue economics which was his main interest during his early career. Ambedkar was among the first set of Indians who were trained in economics systematically and practised it professionally. India has had a hoary tradition of economic studies in ancient times as classics like Arthasastra, Sukraniti, and Tirukkural will attest. However the study of economics untainted by these texts and receiving its inspiration from the largely western (Judeo-Grecian-enlightenment) tradition for analytic study began in the middle of the 19th century. Those who studied economics and wrote economic treatises were not strictly speaking professional economists. They used economics as a political tool. Thus the distinct contributions of Dadabhai Naoroji, Mahadev Govinda Ranade, G V Joshi and numerous other thinker-activists remain polemical writings notwithstanding solid and substantial analytical content. With the 20th century dawning, and universities coming to be established, a professional academic economic community began to evolve. A number of Indians went abroad during the first quarter of this century to get advanced training in the discipline of economics to become professional economists, and they set the tone of economics studies in India until the 1960s. In this first group of foreign trained professional economists we can name C N Vakil, P N Banerjea, Jehangir Coyajee, Gyan Chand, D R Gadgil, P S Lokanathan, J P Niyogi, P J Thomas, P P Pillai, John Mathai, Radhakamal Mukherjea to name a few. Ambedkar belonged to this group to receive education abroad under some of the most eminent economists of the time, but unfortunately he left the pursuit of academic professional economics very soon after coming to India having served for a brief period as professor of political economy at the Sydenham College of Commerce, Bombay. Our main interest today is to examine his solid contributions to the subject before he left the discipline and also see whether anything of the deep understanding of economics he had acquired during the early years, surfaced later.

The first thing that strikes us is that Ambedkar had studied under the foremost authorities of the time both at the Columbia University in the US and at the University of London. He came under the influence of the outstanding American philosopher of the time, John Dewey who was among Ambedkar’s teachers at the Columbia University. Dewey had forsaken the then dominant Hegelian theory of ideas, and formulated an instrumentalist theory of knowledge, which conceived ideas as instruments to solve social problems. Ambedkar internalised Dewey’s message, which considered philosophy, in its essentials, as criticism involving reconstruction. He could also have been influenced by one of the leading anthropologists of the US, A A Goldenweiser in whose seminar, Ambedkar was encouraged to present a paper on castes in India which was later published in the Indian Antiquary (May 1917). What was most fortuitous was Ambedkar’s teacher of public finance, Edwin R A Seligman who was then the McVickar professor of political economy at Columbia, and firmly placed among the most outstanding students of public finance and history of economic thought at that time. You will know that he edited the monumental Encyclopaedia of Social Sciences published in the 1930s. Subsequently, when Ambedkar went to London, his teacher was an equally eminent economist, Edwin Cannan who was also an acknowledged authority on the history of economic thought. It is worth remembering that Cannan’s edition of Adam Smith’s Wealth of Nations was the most used edition until very recently when the Glasgow edition replaced it.

Ambedkar’s major writings are easily listed because after the late 1920s, he seems to have written almost nothing, though he has made some extremely insightful comments here and there one of which I shall elaborate at the end. The major economics publications are The Problem of the Rupee: Its Origin and Its Solution (P S King and Son Ltd, London 1923), and The Evolution of Provincial Finance in British India – A Study in the Provincial Decentralisation of Imperial Finance (P S King and Son Ltd, London 1925). There is one significant academic paper he wrote in 1918, ‘Small Holdings in India and Their Remedies’ in Journal of the Indian Economic Society, Vol I, 1918. Besides these, there is his unpublished MA thesis, Administration and Finance of the East India Company (Columbia University, 1915). Apart from these academic economic writings, there are his Memoranda and evidence given to various government commissions, speeches in the different legislative bodies, and book reviews which all have some economic content. All of these have been brought together by the government of Maharashtra in a multi-volumed complete edition, Dr Babasaheb Ambedkar: Writings and Speeches. It is a matter of some regret that while much devotion and dedication has gone into the production of this edition, adequate attention to proper editing and scholarly annotating has not been tendered.

Earlier I remarked that it was unfortunate for the economics profession that Ambedkar decided to “changeover from economics to law and politics” as he remarked in the preface of the Indian edition of The Problem of the Rupee in 1947. It would appear that even at that stage, he hoped to come back to the subject by bringing the financial history from 1923 onwards in a second volume, and wrote “I can give them (readers) an assurance that they will not have to wait long for volume two. I am determined to bring it out with the least possible delay” (VI, p 323). But alas! within two months of writing this, India became free, and Ambedkar was caught once more in the world of law and politics, and he could not keep this promise.

I shall now examine four broad themes that Ambedkar concerned himself in his professional writings. Firstly, the policies examined by Ambedkar in his The Problem of the Rupee mainly, and elsewhere, deal with monetary standards as they had evolved during the previous few decades. The basic Indian currency unit, the rupee, has had a long history. Until 1893, it was based on a silver standard which means that the Indian rupee was based on the value of the silver content in it. From 1841 onwards gold coins also became legal tender at one mohur as equal to 15 silver rupees. Owing to vast gold discoveries in Australia and US, gold value fell, and from 1853 onwards gold coins ceased to be legal tender. Though many suggestions were made to introduce gold coinage especially after 1872, these were not heeded despite from 1873 onwards, due to enormous silver discoveries, the price of silver fell and hence the price of rupee slipped in terms of gold. From 1872 to 1893, this acted as a continued devaluation of the Indian currency which while was good for Indian exports, was not good for the Indian economy, it had to produce more rupees to remit expenses undertaken in England by India which were in sterling (i e, gold) terms. In 1893, the government stopped coining silver rupees though agreed to coin rupees in exchange of gold at a ratio of one pound four pence per rupee. It became managed currency with the government reserving the right to coin rupees whenever it was found necessary. The idea was to introduce eventually a gold standard with gold currency replacing the existing (managed) silver standard. In 1899, at the suggestion of the currency committee headed by H H Fowler, Indian mints were thrown open to issue gold coins. Gold was sought to be used widely, but it also recommended the silver rupee to remain unlimited legal tender. This was mistaken because under gold currency, rupee should have been token coin. From now on, many events took place till the gold exchange standard came to be established in 1906. According to this system, silver rupee was guaranteed convertibility into sterling pounds (based on gold value) at a fixed price, and make it available without any limit. The accumulated gold in India, instead of supporting a gold standard with gold currency in India, was kept in London to maintain the stability of the rate of exchange. However the system broke down in 1916 with the enormous rise in the value of the silver. Silver rupee more or less ceased to be merely token, and the system effectively became silver standard. Ambedkar’s writings took all this and argued stridently for a proper gold standard with gold currency as he was highly critical of the gold exchange standard though the latter received powerful theoretical support from all the then leading authorities including John Maynard Keynes. Ambedkar’s main thrust was to criticise the “reckless issue of rupee currency” made possible by the gold exchange standard. He highlighted the perversity of the system because gold reserves which were supposed to guard a run on the currency, depend actually upon adding to the currency stock. In general by removing the automaticity of the currency supply within the country, this system vests the government enormous power to bloat the money supply. The excessive importance given to maintain the stability of exchange as against internal stability of the value of currency was not a proper policy for India, he contended. Neither was Ambedkar a votary of deliberate lowering of the exchange rate whether planned or unplanned. Low exchange rate increases exports and boosts internal prices. This benefits the trading classes at the expense of the poorer people at home.

In a gold exchange standard, the coinage is manipulated by the government to keep it at par with the value of gold. Ambedkar asked: Was the job of currency management only important for the amount of gold it will procure in the external market? Obviously not, because “what really concerns those who use money is not how much gold that money is worth, but how much of things in general (of which gold is an infinitesimal part) that money is worth. Everywhere, therefore, the attempt is to keep money stable in terms of commodities in general, and that is but proper, for what ministers to the welfare of people is not so much the precious metals as commodities and services of more direct utility” (VI, p 563). Ambedkar’s commitment was internal stability, and he was convinced that only an automatic system based on gold standard with gold currency could achieve this desirable end. Like every economist of his generation, he was a believer in the quantity theory of money and was afraid that governments will tend to artificially increase money in circulation. In his memorandum given to the Hilton Young Commission in 1925 he pointed out: “a managed currency is to be altogether avoided when the management is to be in the hands of the government”. While there is less risk with monetary management by a private bank because “the penalty for imprudent issue, or mismanagement is visited by disaster directly upon the property of the issuer”. In the case of the government “the chance of mismanagement is greater” because the issue of money “is authorised and conducted by men who are never under any present responsibility for private loss in case of bad judgment or mismanagement” (VI, p 627). In short, Ambedkar’s conclusion is clearly towards price stability through conservative and automatic monetary management. This is of such current relevance that in these days of burgeoning budget deficits and their automatic monetisation, it would appear that we could do with an effective restraint on liquidity creation through an automatic mechanism.

The second theme that Ambedkar discussed in his academic publication The Evolution of Provincial Finance in British India (1925) relates to public finances. Ambedkar draws his main conclusions from his study of the Indian system which are probably even more relevant now than it was at the time he wrote. What arrangements can be made in a public fiscal system that will enable it to be “administratively workable”? The main objective according to him was: “To make administrative polities independent by requiring them to finance themselves entirely out of their own respective resources without having to depend upon one another must always be regarded as a very important end to be kept in view in devising a new financial arrangement”. This is not always possible because of “several concurrent or overlapping tax jurisdiction”. The two methods to solve the problem, i e, ‘system of divided heads’ and ‘contributions’ both have advantages and disadvantages.

Ambedkar looked at some of the consequences of the Montague-Chelmsford reforms in provincial finances. What he cites from the despatch of the secretary of state could have been written now: “If the financial stability of the Provinces is not to be undermined, with ultimate jeopardy to the Government of India itself, it is impossible to contemplate the continuance of a series of Provincial deficits financed by borrowing either direct from the public or from the Central Government”. The similarity does not end. The provinces proposed an increase in their resources by revising the financial arrangements enunciated in the Act. What the secretary of state said in 1922, might have been said by Yashwant Sinha today: “Equilibrium can only be achieved by reduction of expenditure and the adoption of measures which will lead to an increase in revenue”. Ambedkar of course is scathing towards what he calls the “very unreasonable attitude” of the provinces, and points out how they have all failed their duty. Years later in 1939, he was to remark that “patriotism vanishes when you touch a man’s pocket and I am sure that the States representatives will prefer their own financial interest to the necessities of a common front” (I, p 347). He squarely blames the governments for lacking political will to achieve efficient and equitable economic administration: “National prosperity may be great and growing and the increase of national wealth may be proceeding unchecked. If under such circumstances enough revenue is not obtained the fault does not lie with the social income. Rather it is a fault of the government which must be said to have failed to organise and marshal the national resources for fiscal purposes. The same is to some extent true of the Indian government. As for the base of taxation, Ambedkar considered income from land as the most likely source to augment state revenue, but he was vehemently opposed to the “pernicious effect of the system which bases the tax on a unit land held” (VI, 302ff). Ambedkar knew the problem clearly of tax proposals. Under the diarchy, when the government is run by a ministry recruited from the elected members of the provincial legislature, it would be futile to expect tax increases. More generally he said that if “nomination was the general mode of obtaining a seat in the Legislature”, it was not necessary to “mind the prejudices of the electors”. If however, the “seat is in the gift of the elector a candidate to the Legislature who proposes to touch his pocket has a small chance of success, even though the new taxes are to result in more than proportionate benefit”. In any case a political party which “has won power from a bureaucracy by accusing it of heavy taxation cannot easily disgrace itself by continuing the same policy”. But can they reduce public expenditure by enforcing administrative economies? Not likely because under diarchy, the governor in council will not allow retrenchment as he has no particular interest in effecting economies in public expenditure. The result was that “the chances of an early equilibrium in Provincial finance are very small”. One wonders whether Ambedkar was talking of state finances in India in 1999?

Ambedkar’s criticism of diarchy has a modern ring to it. Again in Ambedkar’s words: “if there is no sound finance in the Provinces it is because diarchy is not a good form of government. Now, why is diarchy not a good form of government apart from its basic undemocratic character? The answer …. is very simple….it is opposed to the principle of collective responsibility”. If an administration has to work smoothly, “it must recognise the principle of impartibility of governmental work and a collective responsibility of the administrators in the execution thereof”. It is not easily understood that government work by nature is invisible because in practice “the functions of government can be and commonly are partitioned, as they are between local bodies and between departments” (VI, p 303). This does not mean that there is no “common thread that runs through them all: that no function of government acts in vacuo; that each reacts on some other function, and that the various functions cannot act at all produce orderly progress unless there is some force to harmonise them”. Collective responsibility is this harmonising force. The conclusion is unmistakable: “Hybrid executives, divided responsibility, division of functions, reservation of powers, cannot make for a good system of government, and where there is no good system of government, there can be little hope for a sound system of finance” (VI, p 307). There is some discussion on public expenditure. The main point he makes is that an alien government cannot be expected to use the funds it has to the betterment of the people. As he made it clear: “if the Executive in India did not do certain things most conducive to progress it was because by reason of its being impersonal and also by reason of its character, motives and interests it could not sympathise with the living forces operating in the Indian Society, was not charged with its wants, its pains, its cravings and its desires, was inimical to its aspirations, did not advance education, disfavoured Swadeshi or snapped at anything that smacked of nationalism, it was because all these things went against its grain”. In other words, the government “not being of the people could not feel the pulse of the people”. One would have expected that Ambedkar would have given detailed treatment to problems of taxation and expenditure having been a student of Seligman, but as his concerns were different, he did not give much importance. But his interest surfaced on these issues when dealing with the Indian Constitution almost at the fag end of his professional career.

This leads me to the third theme of Ambedkarian economics. One has heard of the famous canons of taxation enunciated by Adam Smith more than 200-years ago, but has there been any similar canons regarding public expenditure? Nothing so pithy and pointed came my way in my not necessarily exhaustive studies of public finance literature until I happened to notice recently such canons in a most unlikely place. B R Ambedkar while discussing the functions of the Comptroller and Auditor General said in 1949 during the framing of our Constitution that governments should spend the resources garnered from the public not only as per rules, laws and regulations, but also to see that “faithfulness, wisdom and economy” have gone into the acts of expenditure by public authorities. Firstly, the question of faithfulness. Faith in this context as defined by the dictionary is “duty or commitment to fulfil a trust, promise …” A main reason for the existence of public finance is that human beings living in society require certain things like roads, law and order, etc. that cannot be enjoyed exclusively. As the costs and benefits of such items cannot be internalised, they will not be supplied through the free market mechanism. Governments exist to provide these common requirements. Citizens in democratic forms of government are promised by their representatives to improve their welfare by judicious provision of such public goods and services, and they place their trust in the government by delegating authority to take taxation and expenditure decisions. How the individual acts of public spending results in the augmentation of social welfare may not always be obvious because of spillover effects and long gestation periods. When the citizens are thus not in a position to comprehend clearly the consequences of government action, it is so easy to mislead them by false claims. Hence it becomes all the more necessary for the government to be faithful to the original intentions. For example, if a certain sum is allotted to a centre for higher education to improve its facilities without specifying the item of expenditure, a more faithful way of spending would be on libraries, laboratories and other items of teaching and research rather than on frivolous things such as statues of past professors or air conditioned limousine for its vice chancellor. The fidelity to the original intention must be tempered by ‘wisdom’. For example, the original intention of the policy may be to spread appropriate information through expenditure on the activities of the DAVP or information departments. But such a policy when executed may be faithful to the intentions but may not be wise. In other words, expenditure should transcend the personal, the ephemeral and the showy, but must be done with circumspection and understanding of the deeper issues involved. While sagacity, prudence and common sense are the hallmarks of a just and wise ruler, he should also possess experience and knowledge that can be applied critically and practically in specific areas. In the context of a just utilisation of public funds, economic wisdom becomes a paramount necessity. But mere apparent faithfulness to the original intentions and wisdom are not sufficient in themselves for public expenditure to achieve social well-being. The importance of the third canon of public expenditure takes a special meaning here. ‘Economy’ in public expenditure does not simply mean a low level of public spending, but it is the intelligent use of funds so that every paise fetches the most benefit. Those in charge of public funds must strive to evaluate alternative methods of achieving the objectives and see to it that leakages do not occur. The remarkable thing about Ambedkar’s canons is that they are ism-neutral. One can follow a policy of a large or a small public sector and yet the principles behind these canons are applicable. The canons are sufficiently flexible so that expenditure decisions can be related to the state of the economy. For example, what may be economic wisdom in undertaking a particular item of expenditure in one country may be economic stupidity at other times and other places. The canons emphasise that the expenditure decisions should closely relate to the specified objectives and the available resources besides ensuring economy, efficiency and effectiveness in the implementation of government decisions. While the determination of the aggregate level of expenditure is a matter of overall policy based on the democratic will of the people, allocation of that total among competing demands and the manner of utilisation fall within the domain of these canons. Following the canons scrupulously in individual items of expenditure cannot always eliminate problems arising out of the broader economic policy pursued by the government. But they can mitigate the harmful effects of ill-considered policies of our governments. In the present context of high fiscal deficits, a rigorous application of the Ambedkar canons can help reduce the quantum of public expenditure.

The last theme I wish to discuss relates to his ideas on agrarian economy. In his paper ‘Small holdings in India and their remedies’ (I, 453ff) published in 1918, he takes on a problem that is still haunting Indian agrarian system. At that time, British administrators and academics in India who were used to their own country where large agricultural land holdings was the norm, were appalled at the low productivity of Indian land. This they ascribed to the minuscule size of the farm land cultivated by Indian peasants. A number of suggestions emanated from sympathetic observers like H S Jevons of Allahabad University, Harold Mann and G F Keatinge of Bombay, and the committee appointed to make proposals on the consolidation of small and scattered holdings in the Baroda State (1917). They all proposed to consolidate and/or enlarge the holdings in the hands of individual farmers through interesting administrative measures. Ambedkar made a critical examination of the above, and in the process arrived at some very advanced conclusions. To begin with, he struck at the very root of the proposals by arguing that there can be no such thing as a correct size of agricultural holding. As he argued, land is only one of the many factors of production and the productivity of one factor of production is dependent upon the proportion in which the other factors of production are combined. In his words: “the chief object of an efficient production consists in making every factor in the concern contribute its highest; and it can do that only when it can co-operate with its fellow of the required capacity. Thus, there is an ideal of proportions that ought to subsist among the various factors combined, though the ideal will vary with the changes in proportions”. From this he proceeds to say that if agriculture “is to be treated as an economic enterprise, then, by itself, there could be no such thing as a large or small holding”. If this is so, what is the problem? Certainly it is not due to a want of efficiency in utilising whatever the peasant has. Ambedkar cites with approval an English civil servant: “The ryots have a keen eye to the results of a good system of farming as exhibited on model farms”. Ambedkar’s answer rests on the inadequacy of other factors of production. The insufficiency of capital which is needed for acquiring “agricultural stock and implements” arises from savings. But as Ambedkar remarks “that saving is possible where there is surplus is a common place of political economy”. Even this is a surface reason, the ultimate cause being “the parent evil of the mal-adjustment in her social economy”. This is partly defined as the non-availability of sufficient land in India to give her prosperity through the means of agriculture alone. There is almost a prophetic statement made by him long before modern theorists of development systematised notions of disguised unemployment or under-employment: “A large agricultural population with the lowest proportion of land in actual cultivation means that a large part of the agricultural population is superfluous and idle.” Even if the lands are consolidated and enlarged and cultivated through capitalistic enterprise, it will not solve the problem as it will only aggravate “the evils by adding to our stock of idle labour”. The only way out of this impasse is to take people away from land. This will automatically “lessen and destroy the premium that at present weighs heavily on land in India” and large “economic holding will force itself upon us as a pure gain”. He concludes that “Industrialisation of India is the soundest remedy for the agricultural problems of India”. This can generate adequate surplus that will also eventually benefit the agricultural sector. Indeed a shift from primary industry to secondary industry is vital and it must be attempted seriously to prevent the present enlargement of the rural population that was being witnessed and remedies based on what he calls “faulty political economy” were being advocated.

What can we conclude from this brief foray into the various economic themes with which Ambedkar was concerned? To begin, his main purpose in the pursuit of the discipline was normative. In other words, he hoped that his study of economics will lead to useful policy conclusions. Thus policy oriented welfare issues interested him more than studying the technical aspects of the discipline to demonstrate economic theorems. This however does not mean that he did not show any regard for theoretical conclusions derived by others. Indeed it is significant that his knowledge of economic theory was amazingly up-to-date. Not only was his reading of contemporary economic literature wide and deep, he applied whatever that was in the cutting edge of the discipline to concrete situations, very imaginatively. Just to give an example, in a paper he wrote in 1918, he refers to the contributions that appeared in the American Economic Review issued a few months earlier. Another example of his penchant for using received economic theory to critically examine arguments is in an obscure review written in 1918 of Bertrand Russell’s book Principles of Social Reconstruction. Ambedkar takes him on the question of the ‘Love of money’ leading to human beings to “mutilate their own nature from a mistaken theory of what constitutes success” with the consequence of promoting a dead uniformity of “character and purpose, a diminution in the joy of life, and a stress and strain which leaves whole communities weary, discouraged and disillusioned”. Ambedkar tears into this argument of the ‘moralists’ against ‘love of money’ showing that this philosophy is connected to a particular economic circumstances, and not of universal validity. In any case, money is required for something, and it is the purpose for which money is loved “will endow it with credit or cover it with shame” (I, 483ff). He brings the heavy artillery of neo-classical theory of marginal utility developed by as he says “Cournot, Gossen, Walras, Menger and Jevons” to counter Russell’s position that it is all due to individual preference, and that people will give up things as soon as they have too much of anything. His books and papers are full of appropriate citations from the great contemporary economists, Irving Fisher, Alfred Marshall, Richard Ely, Alfred Kemmerer, Allyn Young, and John Maynard Keynes to name a few.

Ambedkar was not content with the current corpus of thought because he had a tremendous historical sense because he was fully aware that present situations wear the scars of the past. In almost all his academic works, he employed the historical method. Whether it is the currency conundrums or public finance, Ambedkar digs deep in the bowels of history to understand the significance the events he was currently analysing. It was analytical rather than the dialectical method he used though occasionally one does find a dialectical approach in his writings. Thus dealing with the need for legal solutions to social problems, he said: “Society is always conservative. It does not change unless it is compelled to and that too very slowly. When change begins, there is always a struggle between the old and the new, and the new is always in danger of being eliminated in the struggle for survival unless it is supported” (XII, p 115). However dialectics as a method of approaching any subject is absent in Ambedkar’s work.

In many areas of Indian economic history, he was truly a pioneer and he faced all the problems that a pioneer faces as he pointed out in the preface of his The Evolution of Provincial Finance. Like Karl Marx some decades earlier, Ambedkar too pored over voluminous government reports and blue books to arrive at firm conclusions. Arising from his conscious use of history, was his use of statistical data. Notwithstanding the various lacunae of the official data, he skillfully marshalled the available data and used whatever statistical techniques that were available at that time. The value of his conclusions are substantial precisely because his analysis was based on sound empirical and historical foundations.

Thanks to Ambedkar’s study under Cannan and Seligman, he was deeply read in the history of economic thought which came in most useful in all his writing. Apart from that he was widely read in history, jurisprudence, literature and classics. All this shows in the remarkable clarity and style one sees in his books, papers, speeches and so on.

One cannot but marvel at the amount of writing he had accomplished and that too in pioneer areas and difficult subjects. And all these before he had crossed his 30 years. The range too is remarkable, from a disquisition on ancient Indian commerce to the current problems faced by the Indian rural population. In all his academic writings – as indeed in his later political life – he was never overawed by authority. If something warranted criticism, he did not hesitate to voice his opinion even if it meant going against the most acclaimed author of the age or his own teacher as in the case of Edwin Cannan. The criticism was always based on sound judgment, and never used in a spirit of bellicosity.

Ambedkar firmly belonged to the Judeo-Greek-enlightenment tradition and was an uncompromising modernist. This shows in his approach to economics, politics, law, society and everything else including the matter of sartorial habits. He himself was always impeccably dressed in western clothes, and chastised Mahatma Gandhi for going to the Round Table Conference in London to discuss political settlement “as though he was going to a Vaishnava shrine singing Narsi Mehta’s Songs” (I, p 351). His preference for a modernist approach comes most clearly when he compared Ranade and Gandhi: “In the age of Ranade the leaders struggled to modernise India. In the age of Gandhi the leaders are making her a living specimen of antiquity. In the age of Ranade leaders depended upon experience as a corrective method of their thought and their deeds. The leaders of the present age depend upon their inner voice as their guide. Not only is there a difference in their mental make up, there is a difference even in their viewpoint regarding external appearance. The leaders of the old age took care to be well clad while the leaders of the present age take pride in being half-clad” (I, p 352). But more importantly he believed in material progress, constitutional approach to solving problems, rule of law, right to property, civil liberties, democracy based on the liberty, equality and fraternity principles enunciated by the French Revolution. His extensive critique of the caste system is also based on enlightenment principles of economic efficiency through private initiative, individual liberties and human equality.

It is possible to construe from his later – especially in the 1940s – that he moved away from the strict mainstream economic theoretical position. It is no doubt true that he moved towards an economy based on state socialism where he proposed “state ownership in agriculture with a collectivised method of cultivation”, state ownership of industry, nationalisation of insurance and so on. It was probably more due to functional reasons than any fundamental change in his enlightenment economic ideology, because he felt that private sector had not achieved growth and his rational mind told him that we should “put an obligation on the state to plan the economic life of the people on lines which would lead to highest point of productivity without closing every avenue to private enterprise, and also provide for the equitable distribution of wealth” (I, p 408). We must recollect that Ambedkar placed much value on democracy and individual liberty which he thought could be preserved by judicious state action. In a sense this conforms to the classic Smithian position. The causal chain that Adam Smith envisaged was that economic and social freedom/equality will propel the society towards political equality/freedom. And this is long lasting than the other way round where first you get political freedom and strive to achieve economic and social equality/freedom. In almost all his writings, Ambedkar while fighting for political emancipation, does not forget the need for social and economic reforms. Again it was Ambedkar’s strong belief in the primacy of rationally directed social and economic development that he advocated centralisation of economic activities. Whether it is his signal achievements in formulating a coherent national water policy (done during his membership of Viceroy’s Council 1942-1946) as elaborated in a recent book Ambedkar’s Role in Economic Planning and Water Policy by Sukhadeo Thorat, or his helping to give a unitary bias to the Indian Constitution, Ambedkar’s anxiety was to promote economic and social development of the Indian nation as quickly as possible. Indian Constitution is more unitary than federal which in a sense is a reflection of Ambedkar’s long standing bias as he said in 1939 at the Gokhale School of Politics while delivering Kale Memorial Lecture: “I am not opposed to a Federal Form of Government. I confess I have a partiality for a Unitary form of Government. I think India needs it” (I, p 353).

This is not a place to involve myself in a controversy especially about Ambedkar’s writings after 1925. But frequently mention is made about Buddhism and Marx while discussing Ambedkar’s ideas. Obviously he was appreciative of the humanitarian and anti-exploitative sentiments that are in Buddhist and Marxian thought, but there is no evidence of them in his academic works. Even in later years when he did study Buddhism deeply in order to convert to that religion, his reading of Buddhist economics is at variance with that of others especially Schumacher, who in his Small Is Beautiful writes a substantial essay on Buddhist economics. There is more in common with the anti-modernist Mahatma Gandhi rather than with the modernist Ambedkar.

The four themes from the early writings of Ambedkar that I have sketched here shows in ample measure his keen economic mind and there is every possibility that he might have achieved substantial success in academic economics had he chosen to continue in the groves of academe. But he must have been touched by what the great enlightenment Scottish philosopher, Adam Ferguson stated in 1767 in his monumental An Essay on the History of Civil Society: “Where power is already established, where the strong are unwilling to suffer restraint, or the weak unable to find a protection, the defects of law are marks of the most perfect corruption”. This could have led him to the study of law and jurisprudence so that he could reform the legal system to make it more equitable and civilised. But law and economics are very much intertwined and though he might have exiled himself from the academic pursuit of economics, the practice of that discipline was not totally absent in his legal and political career. We can end our tribute to this great son of India no better than what the unfortunate Pope Gregory VII, the great reforming Head of the Catholic Church of the 11th century said: Dilexi justitiam et odi iniquitatem, propterea morior in exilion (I have loved justice and hated iniquity: therefore I die in exile).

[I am grateful to Professor Kuppuswamy, Ambedkar Professor at the Madras University not only for inviting me to deliver this lecture but also for providing me with necessary books and other materials. References in the brackets refer to the volume and page of Babasaheb Ambedkar: Writings and Speeches brought out by the Government of Maharashtra.]

Source: EPW

26 Responses to “Ambedkar’s Contributions to Indian Economics”

  1. 1 Venkatesha

    Dear Sir,

    Where I could get book named “A Problem of Rupee, its origin and solution’ written by DR BR Ambedkar in the year 1923.



  2. You may get it from Govt of Maharatsra Publication division either in Nagpur or in Mumbai. Else, for online version, try

  3. Sir

    I am impressed by Honourable DR BR AMBEDAKARR’ ECONOMIC THOUGHTS .


    please guide me how can i get.

    With Regards


    Actual evaluation of Dr. B.R. Ambedkar has not done yet in India. The real scholar in the field of economics, he was. But the context of ” Purchasing Power Parity” will bring him in the lime lite of Indian Economics very soon.

  5. is the indian people, Media, Intelactual & Govt. Still treated the Dr. Ambedkar & his Work Untchable, then why they all not recognise his work & thought for Nation, only Treated as leader of dalit

  6. v

  7. 7 Mahadev gujre

    Dr. B.R. Ambedkar is a great leader, and a great person.i salute him for his work and great afforts for people..

  8. 8 Mahadev gujre

    A great leader, in India..

  9. 9 Dr. Deva Ram, Lecturer in Economics, Government College, Nimbahera (Raj.)

    Dr. Ambedkar was not only a great leader but also a great lawyer, a great politician, an economist…… one of constitution builder…… and above all these he was a great person.
    Your valuable study is demand of the time. ….. Thanks.

  10. 10 Anand Alte Latur(Maharashtra)

    Really a great article…actually GOVT should broadcast all Dr.Ambedkars speeches/constitutional debates on television…then people will come to know more of Dr.Ambedkar……Hw can we make GOVT to do this???????

  11. 11 Dr. Deva Ram, Lecturer in Economics, Govt. College, NIMBAHERA (Raj.)

    I want to gain some more knowledge about ambedkar’s contribution to the economics. ………….. thanks.

  12. 12 rajendra kumar arya

    sir muje b.r.ambhedkar ji ka arthik vichar par hindi varson chahiye

  13. 13 Rakesh

    Dr. Babasaheb Ambedkar has many faces in terms of politics, economy and society and above all the great humanitarian who has great empathy to the peoples…. a great tribute

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  22. 22 Gangadhar Ingale

    Sir, I think that ,UGC will be include Dr. B. R. Ambedker’s thesis in Economics syllabus for University

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