Impact of Dr.

Ambedkar's Thoughts on Indian

Economy

Written by Shweta Wankhede

Whenever any country faces difficult situations, challenges, whether it is a political or economical,
the intellectuals and politcians at some point or another need to search their own country's
history for the solutions. The historical events, its people and their thoughts, that has shaped the
country and its people future, proves to be the vital elements for the solving the current
challenges
of
the
country.
Dr. Babasaheb Ambedkar is one such great thinker, leader and intellectual of its time in India who
has not only changed the life of millions of untouchables but shaped India as a biggest
democratic nation by writing its constitution. What is well known about Dr. Ambedkar is his fights
against Caste sytem in India, But what is not known is how Dr. Babasaheb Ambedkar had also
Impacted
the
Indian
economy.
Here are some of Dr. Ambedkars thoughts that had great impact on Indian economy.

Agriculture and land reforms.

Dr. Babasaheb Ambedkar had made in-depth study of Indian Agriculture, wrote research articles,
organised Seminars and Conferences in order to Solve the problems of agriculture and farmers,
also led farmer's movement. His thoughts on agriculture are found in his article "Small Holdings
in Indian and their remidies"(1917)and also in "Status and minorities"(1947).
He mentioned that holdings of lands by few people is an acute problem of Indian agriculture
which has various disadvantages, like difficulties in cultivation and utilization and resources,
increasing cost, low productivity, inqdequate income and low standard of living. According to Dr.
Ambedkar Productivity of agriculture is related to not only with the size of holdings of land but
also with other factors such as capital, labour and other inputs. Therefore if capital, or labour etc
are not available in adequate quantity and quality, then even a large size land can become
unproductive. On the other hand small size land become productive if these resources are
available in plenty. With this thought the 'Land Ceiling Act' is passed after Independence.
He also mentioned about the slavery and exploitation of Labour bounded under caste system is
extremely
bad
for
economical
development
and
fought
for
its
abolition.
His other suggestion for solving agriculture problem are collective farming, economic holding of
land or equal distribution of land, Large scale Industrialization, Provision of money, water, seeds
and fertilizers by the government, cultivation of waste land by allotting waste land to landless
labour, minimum wages to labours, control and regulation of private lenders of loan to farmers.

India's Currency Problems.

Dr. Babasaheb Ambedkar's thoughts has a great impact on current Indian currency system.
Under British rule when India Govt. was struggling with falling value of Indian Rupee, Dr.
Babasaheb Ambedkar In 1923 wrote 'The problem of Rupee, its origin and solution. He focused
his studies and research on the condition of Indian currency during British India. He wrote
research thesis on it. In his thesis, he argued that the gold exchange standard does not have
stability. The developing countries like India can not afford gold exchange standards, and besides
this, it also increases the risk of inflation and price rise. He proved with statistics data and
reasons how the Indian Rupee has lost its value and hence the purchasing power of Rupee is
falling. He suggested that govt. deficit should be regulated and money should have a circular
flow. He also suggested more attention should be given on price stability than exchange rate
stability.
This book eventually lead to the establishment of Reserve Bank of India.

Views of Taxation policy.

Dr. Ambedkar expressed his views on taxation in the manifesto of 'Swatantra Majdur Party' in
1936. He opposed Land Revenue and its system and their taxes as the burden of these taxes are
significant on the poor sections of the society. He suggested somes taxes as follows.
Tax
should
be
imposed
on
payers
capacity
and
not
on
income.
Tax
should
be
less
on
poor
and
more
on
rich.
Tax
exemption
should
be
given
upto
certain
limit.
There
should
be
equality
between
different
section
in
tax
imposition.
Tax should not lead to lowering the standard of life of the people.
Land Revenue tax should be more flexible and should not levy on agricultural land.
He suggested that Indian tax system at that time was based on discrimination and inequality.

Nationalisation of Industries.
Dr. Babasaheb Ambedkar thought that fast development of India is impossible without
Industrialization. According to him creating large scale employment produces essential goods for
mass consumption. It utilizes raw materials, reduces foreign dependence and increasing security
to labour, ultimately leads to the overall economical development of the country. The private
sector industries can not make big industries for want of large scale investments. So, government
should come forward to start large scale industries .The smaller industries should be kept in
private sector. The insurance and transport companies should be nationalized. Rights to strike
should be given to labourers. After the independence the industrial policy of the Indian
government is in keeping with Dr. Ambedkar's expectations.

Strategy for economic development.

Dr. Ambedkar believed that the strategy for India's Economic development should be based on
Eradication of property elimination of inequities and ending exploitation of masses. He
emphasized exploitation has many dimensions In fact in the India, social or religious exploitation
is no less Oppressive than economic exploitation and it should be eliminated.

Democratic state Socialism.

Dr. Babasaheb Ambedkar has presented a Democratic State Socialism to the constitution
committee.
The
main
points
of
it
are
1)
All
basic
industries
should
be
owned
and
run
by
the
state.
2) Insurance and agriculture should be nationalized and managed by the state.
3)
Maintenance
of
Productive
resources
by
state.
4)
Just
Distribution
of
Common
produce.
5) Provision for compensation of land or industry acquisition in the form of bonds.
6) The distribution of village and among the families in a village for collective farming
7)
No
discrimination
as
landlord,
tenants
and
agriculture
labours.
8) All agriculture input like capital, seeds fertilizers etc would be provided to collective farming by
the
government.
9) Distribution of agriculture income only after payment of land revenue tax.
10) Punishment according to rules who do not follow
Dr. Ambedkar wanted this state socialism to be inculded in the constitution so that no legilature
could change or reject it. But it could not come into existance as the constitution committee
rejected it. It suggest that the conditions of labour, farmers and poor people would have different
if this has not been rejected.

Free Enterprises Economy.

Surprising enough Dr. Ambedkar had already suggested free economy, globalization,
liberalization and privatization as early as in 1923, Recently Indian government has adopted this
policy. In this repect Dr. Ambedkar was a century a head. He had stressed that the value
(Price)of a rupee must be kept stable if the policy of free economy is to be successful.

Population Control - Family Planning

Dr. Babasaheb Ambedkar said that the control of the country's economy is impossible if the

population is not controlled. Hence he forcefully argued for population control and family planning
in India. Later on in keeping with his views the govenment of India has adopted family planning
as a national policy.

Economic Upliftment of Indian Women.

Dr. Babasaheb Ambedkars contribution to economic development and progress of women is
significant. According to him, participation of women in the economic development is impossible
without developing their social status and equality. But due to bad economic conditions of women
in India, India's economic progress is hampered. So, it is important to improve the economic
condition of women and give them equal rights and freedom of occupation.

Concept of Human Capital.

Dr. Ambedkar argued that concept of human capital in india is useless if the poorer and down
trodden untouchable dalits are not recognized by other classes as human being with equal social
prestige and religious basis. It is therefore impossible to use this human capital in the economic
development of India.

Opposition to Hindu Economy.

Dr. Ambedkar denounced the Indian economy as Hindu dominated economy. He came out with
hard hitting critique of this Hindu economy. He showed logical flaws in it. Caste System is not
merely the division of labour but a division of labourers also. It is not based on natural aptitudes
or skills. It is a major abstacle to economic development. It reduces mobility leading to inefficient
production. Untouchability is worse than slavery. It is a system of exploitation.
Hence It is evident that Dr. Babasaheb Ambedkar's concepts of family planning, uplittment of
women and human capital and many others are important contribution to the development of the
Indian economy. as the existing laws and reforms land ceiling Act, minimum wages Act,
Distribution of surplus land etc are not effective it is essential to reconsider them in the context of
Dr. Ambedkar's perspective. Also as current scenario of Indian economy, inflation, farmer
conditions, India's large young labour force not being fully utilised for the economic development ,
we need to reconsider the thoughts of Dr. Babasaheb Ambedkar and again frame our economic
policies towards better economical growth of India.

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A new resonance

In his views on crucial issues pertaining to economic development, Dr. B.R.

Ambedkar comes across as a radical economist who would have staunchly
opposed the neoliberal reforms being carried out in India since the 1990s.
VENKATESH ATHREYA
DR. BABASAHEB AMBEDKAR was among the most outstanding intellectuals of
India in the 20th century in the best sense of the word. Paul Baran, an eminent
Marxist economist, had made a distinction in one of his essays between an
"intellect worker" and an intellectual. The former, according to him, is one who
uses his intellect for making a living whereas the latter is one who uses it for
critical analysis and social transformation. Dr. Ambedkar fits Baran's definition of
an intellectual very well. Dr. Ambedkar is also an outstanding example of what
Antonio Gramsci called an organic intellectual, that is, one who represents and
articulates the interests of an entire social class.
While Dr. Ambedkar is justly famous for being the architect of India's Constitution
and for being a doughty champion of the interests of the Scheduled Castes, his
views on a number of crucial issues pertaining to economic development are not so
well known. Dr. Ambedkar was a strong proponent of land reforms and of a
prominent role for the state in economic development. He recognised the inequities
in an unfettered capitalist economy. His views on these issues are found scattered
in several writings; of these the most important ones are his essay, "Small Holdings
in India and Their Remedies" and an article, "States and Minorities". In these
writings, Dr. Ambedkar elaborates his views on land reforms and on the kind of
economic order that is best suited to the needs of the people.
Dr. Ambedkar stresses the need for thoroughgoing land reforms, noting that
smallness or largeness of an agricultural holding is not determined by its physical
extent alone but by the intensity of cultivation as reflected in the amounts of
productive investment made on the land and the amounts of all other inputs used,
including labour. He also stresses the need for industrialisation so as to move
surplus labour from agriculture to other productive occupations, accompanied by
large capital investments in agriculture to raise yields. He sees an extremely
important role for the state in such transformation of agriculture and advocates the
nationalisation of land and the leasing out of land to groups of cultivators, who are
to be encouraged to form cooperatives in order to promote agriculture.

Intervening in a discussion in the Bombay Legislative Council on October 10,

1927, Dr. Ambedkar argued that the solution to the agrarian question "lies not in
increasing the size of farms, but in having intensive cultivation that is employing
more capital and more labour on the farms such as we have." (These and all
subsequent quotations are taken from the collection of Dr. Ambedkar's writings,
published by the Government of Maharashtra in 1979). Further on, he says: "The
better method is to introduce cooperative agriculture and to compel owners of
small strips to join in cultivation."
During the process of framing the Constitution of the Republic of India, Dr.
Ambedkar proposed to include certain provisions on fundamental rights,
specifically a clause to the effect that the state shall provide protection against
economic exploitation. Among other things, this clause proposed that:
* Key industries shall be owned and run by the state;
* Basic but non-key industries shall be owned by the state and run by the state or
by corporations established by it;
* Agriculture shall be a state industry, and be organised by the state taking over all
land and letting it out for cultivation in suitable standard sizes to residents of
villages; these shall be cultivated as collective farms by groups of families.
As part of his proposals, Dr. Ambedkar provided detailed explanatory notes on the
measures to protect the citizen against economic exploitation. He stated: "The main
purpose behind the clause is to 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. The plan set out in the clause proposes state
ownership in agriculture with a collectivised method of cultivation and a modified
form of state socialism in the field of industry. It places squarely on the shoulders
of the state the obligation to supply the capital necessary for agriculture as well as
for industry."
Dr. Ambedkar recognises the importance of insurance in providing the state with
"the resources necessary for financing its economic planning, in the absence of
which it would have to resort to borrowing from the money market at high rates of
interest" and proposes the nationalisation of insurance. He categorically stated:
"State socialism is essential for the rapid industrialisation of India. Private
enterprise cannot do it and if it did, it would produce those inequalities of wealth

which private capitalism has produced in Europe and which should be a warning to
Indians."
ANTICIPATING criticism against his proposals that they went too far, Dr..
Ambedkar argues that political democracy implied that "the individual should not
be required to relinquish any of his constitutional rights as a condition precedent to
the receipt of a privilege" and that "the state shall not delegate powers to private
persons to govern others". He points out that "the system of social economy based
on private enterprise and pursuit of personal gain violates these requirements".
Responding to the libertarian argument that where the state refrains from
intervention in private affairs - economic and social - the residue is liberty, Dr.
Ambedkar says: "It is true that where the state refrains from intervention what
remains is liberty. To whom and for whom is this liberty? Obviously this liberty is
liberty to the landlords to increase rents, for capitalists to increase hours of work
and reduce rate of wages." Further, he says: "In an economic system employing
armies of workers, producing goods en masse at regular intervals, someone must
make rules so that workers will work and the wheels of industry run on. If the state
does not do it, the private employer will. In other words, what is called liberty from
the control of the state is another name for the dictatorship of the private
employer."
India's experience with neoliberal reforms since 1990 shows that Dr. Ambedkar's
apprehensions regarding the implications of the unfettered operation of monopoly
capital, both domestic and foreign, were far from misplaced. As has been
documented and written about extensively, during this period of neoliberal reforms,
there has been no breakthrough in the rate of economic growth. At the same time,
there has been a distinct slowing down of the rate of growth of employment and
practically no decline in the proportion of people below the poverty line.
Agriculture has been in a crisis for some time now and the rate of growth of
industry has also been declining for several years now. At the same time, despite a
slower growth of foodgrains output, the government is saddled with huge excess
stocks, which it seeks to sell abroad or to domestic private trade at very low prices.
The government and its economists, instead of recognising that the crisis is the
product in large part of the policies of liberalisation, privatisation and
globalisation, propose a set of so-called second-generation reforms. At the centre
of these reforms is the complete elimination of employment security. The war cry
of the liberalisers is: "Away with all controls and the state, and let the market rule."

In this context, one cannot but recall Dr. Ambedkar's words that liberty from state
control is another name for the dictatorship of the private employer. Whether on
labour reforms or on agrarian policy or on the question of the insurance sector or
the role of the public sector in the context of development, Dr. Ambedkar's views
are in direct opposition to those of neoliberal policies.
It is indeed a pity that self-styled leaders of Dalit movements, who invoke Dr.
Ambedkar's name day in and day out, do not examine carefully his views on key
issues of economic policy and their contemporary relevance for the struggles of the
oppressed. One may not expect much from those Dalit-based political forces which
think nothing of cohabiting with the Sangh Parivar, but even many sections of the
Dalit movement which proclaim a radical stance on social (and sometimes
economic) issues do not raise the question of land or of the role of the state in the
sharp manner in which Dr. Ambedkar does.
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The conspicuous absence of Dr Bhimrao Ramji Ambedkars economic thought in

celebrated works of eminent Indian economic historians begs a question.
Ambedkars identity as an economist might have escaped their notice because of his
fame as the chairman of the Drafting Committee of the Constitution and as a leader
of the backward and downtrodden sections of Indian society. This may be true in
case of ordinary citizens of India, but surely not an acceptable alibi from any serious
researcher in the area of Indian economic thought.
However, of late Amartya Sen has recognised Ambedkar as the father of his
economics (May 2007). This recognition might hopefully inspire economic historians
to have fresh look at Ambedkars works with unbiased minds. However, the present
discussion is devoted to pointing out in brief the different dimensions of Ambedkars
identity as an economist.
Ambedkars life time (14 April 1891-6 December 1956) starts from the last decade of
the 19th century and extends up to a little after the mid-20th century. He was born in
an untouchable Mahar family in Mhaw in Madhya Pradesh and had a childhood of
struggle for being untouchable and poor. The opportunity of having higher education
in USA and England in Economics and various other subjects in social sciences and
law equipped him intellectually to study contemporary socio-economic problems that
emanated from a hierarchical social structure under an exploitative foreign rule. His
probing analysis of the social order and the nature of exploitation perpetrated by the
traditional social system was not only revealing but helped suggest pragmatic
remedial measures which, due to lack of implementation, could not produce desired
results, neither in his time nor thereafter

His analytical faculty and pragmatic approach could be understood for the first time
in his 42-page research paper entitled Administration and Finance of the East India
Company submitted in Columbia University as the dissertation for MA (Economics)
degree in 1915. This dissertation offers a historical account of the administration and
finances of the East India Company and brings out economic and legal implications
which ran counter to the interest of Indians.
An important finding of this study made him score above RC Duttas analytical
faculty. It is regarding the heavy tribute that India had to pay regularly to Britain by
way of home charges which was entirely the creation of war and was illegitimate.
The act of 1858, which goes by the name Act for better government of India, states
that: the revenues of India shall not, without the previous consent of both Houses of
Parliament, be applicable to defray the expenses of any military operations carried
on beyond the external frontiers of such possessions by her Majestys forces
charged upon such revenues.
This provision of the act was used by many scholars in India including RC Dutta to
justify this heavy tribute by India as salutary financial provision. The basic drawback
of this justification, according to Ambedkar, lies on two crucial points (i) the revenues
of India have been spent outside India for non-indian purpose, even after the Act
and (ii) the fatal error lay in this, - the excepting clause in the above section which
sanctions the expenditure of Indian revenue outside of India omits the vital word
previous. To have any salutary impact previous consent of the Parliament is a
necessary requirement. The previous consent was not taken. This escaped the
notice of everybody including Indian scholars. This finding of Ambedkars work not
only established his identity as a brilliant analytical economic historian but as a bold,
patriotic Indian as well.
The other work on economics was entitled Provincial Finance in British India, which
was his Ph.D. thesis in Columbia University USA in 1917, and was published in book
form in 1925. It was considered to be a basic contribution to the theory of public
finance. To be more specific it dealt with Centre-state financial relationship in British
India covering the period 1833 to 1921. This probing analysis was highly acclaimed
all over the world.
Professor Dr Edwin Robert Anderson Seligman, the then Professor of Political
Economy, Columbia University, New York, an authority on the subject, editor in chief
of Encyclopedia of Social Sciences and one of the founder members of American
Economic Association, commented that, the value of Mr Ambedkars contribution to
this discussion lies in the objective recitation of the facts and the impartial analysis of
the interesting development that has taken place in his native country. The lessons
are applicable to the other countries as well; nowhere, to my knowledge, has such a
detailed study of underlying principles been made.
The inquiry into the causes of financial malady of British India and the suggestion of
sharing the financial responsibility by the Centre and provinces were really
commendable. Apart from the international recognition of Ambedkars thesis at that
time his ideas even today go a long way in determining the federal structure that has
been adopted by different nations including India. It may be mentioned here that the
Finance Commission, which is appointed for five years as per the Constitutional

provision, is the result of Ambedkars thesis. This, in a sense, is considered a

permanent solution to the complicated issue that was associated with the Centrestate relationship. This is no doubt a significant contribution to the theory of public
finance and more specifically to the theory of federal finance.
A significant contribution is his celebrated book entitled The Problem of the Rupee:
Its origin and Its Solution, published in 1923. Before its publication London School of
Economics had awarded him D.Sc. degree in economics in 1921. The second
edition of the book was published in 1947. This book shows that he was an authority
in economic policy and currency problems. He analysed very meticulously the
problem of Indian currency from 1800 to 1920 and suggested a currency system for
India. In so doing he sharply differed with the idea of John Maynard Keynes.
Ambedkar advocated the gold-standard and Keynes prescribed goldexchangestandard in his treatise entitled Indian Currency and Finance published in the year
1909. Ambedkar argued in favour of gold-standard because in this system the supply
of currency cannot be so easily made and as such it better insures stability of prices
and so that poorer sections would get relief. Though Ambedkars suggestion was not
taken up by the Imperial Government, his intention of protecting the interests of the
poor is clear.
Ambedkar submitted interesting evidence to the Royal Commission on Indian
Currency and Finance when he appeared before it on 5 December 1925. This
contribution might have gone a long way to establishment of the Reserve Bank of
India
Though Ambedkar could not bring out the second edition, his idea of economics
actually permeated through his programmes of action in the field of politics. His
identity as an economist did not get diluted because of the diverse activities he was
engaged with during the rest of his life. Ambedkar knew that India was predominantly
an agricultural economy, that 80 per cent of the population lived in villages,
agriculture was their main occupation and they were not economically well off. He
believed that rural poverty should be eradicated. Towards this end, he organised
mass movements and had reasonable success.
The abolition of Khoti system (1949) Mahar Vatan, (1959) and introduction of The
Bombay Money Lenders Bill (1938) stand out as distinct success stories of his
movement. In some parts of Konkan region of Maharashtra, Khots (like Zaminders)
had rights to land, which were cultivated by farmers from whom the Khots would
collect revenue, a part of which was shared with the government. This was called the
Khoti system and it subjected the vast majority of rural farmers to oppression and
exploitation.
Ambedkar initiated a movement against this system on 14 April 1929 in an
Agricultural Conference in Chiplun of Ratnagiri District. In 1936, he founded
independent labour party and its manifesto gave high priority to the abolition of the
Khoti system. On 17 September 1937, a historic bill for abolition of the Khoti system
was introduced by Ambedkar in Bombay Legislative Council. After a long struggle the
Khoti system was abolished in 1949.

The Mahar Vatan system was an outcome of The Bombay Hereditary Offices Act
(1874), which was used to exploit rural poor of the Mahar caste. Mahars used to
hold very low-level government jobs, mostly odd jobs of all government departments
round the clock. In fact, these Mahars and their families were at the beck and call of
government officers for 24 hours without any defined task. The range of their jobs
included removal of carcasses to running with the tonga of officers throughout their
journey. In return Mahars were given a piece of land called Vatan to be cultivated by
them, and a part of the produce was passed on to the government as Baluta.
Sometimes, a paltry sum of money used to be given by way of wage. This
remuneration was not regular and officers would increase or decrease the sum and
the size of the land - arbitrarily. This inhuman exploitation was perpetrated by giving
them an ego-boosting description like Vatandars (which means landlords) and in
turn they were saddled with heavy duties.
As Labour Member of Viceroys Executive Council from 1942 to 1946, Ambedkar
introduced a number of welfare measures for the working class of India. Notable
among them are establishment of employment exchanges, machinery for fixation of
minimum remuneration, tripartite dispute settlement mechanism, fixation of working
hours, working conditions, maternity leave, leave with pay etc. which, even today
offers a safety net to labourers. These labour welfare measures take care of not only
the productivity of labour, but insurance of the claim of legitimate share of labour in
the total production or income of the industry. In a sense, it takes care of growth and
development as well. Higher productivity of labour means the growth of income and
legitimate share of the labour means more equitable distribution of income and less
inequality of distribution, which in turns means development. Ambedkar, a man
educated in USA and UK, was not an armchair economist. He was an economist in
thought and action with a rare vision.
The writer is a former professor and head of department of economics,
Jadavpur University
Ambedkars identity as an economist might have escaped notice because of
his fame as a leader of the downtrodden sections of the Indian society.
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