Dr. Babasaheb Ambedkar (Vol. 6): Writings on the Economy and Public Finance

Dr. Bhimrao Ambedkar (1891-1956), or Babasaheb Ambedkar, was a scholar, social reformer, powerful advocate of the rights of Dalits and women, chairman of the Constituent Assembly of India, and the country’s first law minister.

In 1976, the government of Maharashtra set up the Dr. Babasaheb Ambedkar Source Material Publication Committee to compile Dr. Ambedkar’s complete works. The Committee consisted of the state’s then education minister and noted scholars and writers. In 1978, when Vasant Moon (Dalit activist, author and Officer on Special Duty) joined the Committee, it decided to procure and publish Dr. Ambedkar’s unpublished writings too.

In 1979, the state’s Education Department started to publish a 22-volume series titled Dr. Babasaheb Ambedkar: Writings and Speeches, and it brought out this sixth volume in 1989. The series was re-printed by the Dr. Ambedkar Foundation, an autonomous body under the Ministry of Social Justice and Empowerment, in January 2014.

The sixth volume – arranged in three parts or ‘books’ – contains Dr. Ambedkar’s writings on the economy and finance of India at the time.

Book I: Administration and Finance of the East India Company

“Apparently the immenseness of India’s contribution to England is as much astounding as the nothingness of England’s contribution to India.” – writes Dr. Ambedkar in a dissertation submitted to Columbia University, New York, for an MA degree that he received in 1915. 

Book I includes this observation and discusses the administration and finances of the East India Company, which was both a ‘Commercial Concern’ and a ‘Political Sovereign’ at the time. This dual role meant that the fiscal administration of the Company was an “entangled phenomenon,” – the commercial and revenue returns were merged without any attempt at distinction.

Dr. Ambedkar quotes The Economic History of India Under Early British Rule, a 1901 book by Romesh. C. Dutt (scholar, writer, translator, civil servant, politician from the Bengal Presidency, and president of the Indian National Congress in 1899): “The net financial results of Indian administration was therefore a surplus of thirty-two millions during forty-six years [between 1792 and 1857].” This surplus went to England as dividends to the Company’s shareholders.

Even this flow of money from India was insufficient to pay the dividends, and so the Company raised loans in England and India as part of the ‘Public Debt of India’. “The Public Debt of India, at least under the Company’s rule, was entirely the creation of war.” Here, he refers to the Company’s expenditure on military operations to consolidate its ‘Empire’.

However, the British Parliament refused to share the burden of the Company’s debt, and supported this refusal by passing the Government of India Act, 1858. Through the Act, “The entire heavy load of the debt of the East India Company amounting to £69,473,484—mostly unproductive—was placed on the shoulders of the poverty-stricken natives who had no voice in the doings of the Company.” The Act, noted Dr. Ambedkar, made no provision for enlisting the voice of the natives in the administration of their own country.

Book 2: The Evolution of Provincial Finance in British India: A Study in the Provincial Decentralization of Imperial Finance

This book was published by P. S. King & Son Ltd., Great Britain, in 1925. It contains a foreword by Edwin R. A. Seligman, who was at the time Professor of Economics, Columbia University, New York.

A student of Indian finance, writes Dr. Ambedkar, has two chief sources of information: the ‘Annual Budget Statement’ and “the annual volume of Finance and Revenue Accounts.” But the categories of accounts – such as ‘Imperial’, ‘Provincial’, ‘Incorporated Local’, ‘Excluded Local’ categories – have not remained the same through the years. “Nothing is more confusing to a beginner than the entrance of the new, and the exit of the old, categories of accounts.”
Arranged in four parts, this book covers the origin (Part I), development (Part II) and ‘mechanism’ (Part III) of one such category – ‘Provincial Finance’, and how it is affected by the Government of India Act, 1919 (Part IV).

Part I, writes Dr. Ambedkar, covers “thorny, untrodden… ground” to presents a general overview of the system of finance that existed before the inauguration of Provincial Finance and states the causes that necessitated a change in its organisation. Part II marks the different stages of growth of Provincial Finance – ‘Assignment’, ‘Assigned Revenues’ and ‘Shared Revenues’; Dr. Ambedkar states that the stages must be divided based on the method employed to “…bring about an equilibrium in the Budget.”

Part III examines the organisation of Provincial Finance. It states that “…there were neither provincial revenues nor provincial services as separate from Imperial revenues and Imperial services, so that instead of being federal in its organization the system remained essentially Imperial.”

Part IV is a discussion of the changes introduced into the mechanism of Provincial Finance by the Reforms Act of 1919. Chapter X of this Part is an analysis of the causes which led to these changes. Chapter XI contains a full description of the changes effected by the new law, while Chapter XII is a critique of the new regime.

Part IV discusses the Government of India Act, 1919, which introduced a system of ‘dyarchy’ in the legislature of British India – there was a partition in the ‘subjects’ and ‘governmental work’ between the central and provincial governments. Dr. Ambedkar states: “Hybrid executives, divided responsibility, division of functions, reservation of powers, cannnot 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. The primary solution is that there should be an undivided government with a collective responsibility. That, however, can be achieved only when the whole of government derives its mandate from a common source.”

Book 3: The Problem of the Rupee: Its Origin and its Solution

This book was published by P.S. King & Son Ltd., Great Britain, in 1923. It discusses the events that led to the establishment of an ‘exchange standard’ for Indian currency. The object of this study, as stated by Dr. Ambedkar, was to suggest a way to “place the Indian Currency System on a sounder footing.”

Ambedkar examined the early history of Indian currency, extending from 1800 to 1893. He traced the movement from ‘a double standard’ – a currency consisting of both gold and silver coins in circulation under the ‘Moghal Empire’ – to the demonetisation of gold coins and adoption of a ‘silver standard’ in 1833, to the adoption of a ‘gold exchange standard’ in 1898.

Discussing the work of Prof. John M. Keynes (born in 1883, he was an English economist, journalist, and financier – best known for his economic theories), Dr. Ambedkar clarifies: “Our differences extended to almost every proposition he has advanced in favour of the exchange standard. This difference proceeds from the fundamental fact, which seems to be quite overlooked by Professor Keynes, that nothing will stabilize the rupee unless we stabilize its general purchasing power. That the 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.”

Dr. Ambedkar states that the best way to stabilise the rupee “…would be to have an inconvertible rupee with a fixed limit of issue.”

Focus by Ajay Srinivasamurthy.