Ambedkar’s Economic Thoughts – Explained

ambedkar philosophy on religion

D.R.B.R.  AMBEDKAR  is an economist of all time, but his economic thoughts have not been read, followed and propagated. He is a multifarious genius but surprisingly his economic thoughts remained unknown even to great personalities. The reasons can be

1. INTELLECTUAL SLAVERY: That means Indians quite often quote foreign authors neglecting the contributions of Indians.
2. SHADOWINGEFFECT:   This says due to his phenomenal contributions made in diverse fields, the economic contributions have been overlooked.
3.  Due to the differences, he had with Congress in the post-independence era.
4. A part of fault also comes from Dalits for projecting him exclusively as their leader.
But as a matter of fact, Ambedkar is an economist by profession with an MA and PhD degree from Columbia University and Dsc from London school of economics. SHAHU MAHARAJ has financially supported Ambedkar to continue his studies in economics in LSE.
His three scholarly books on economics  are:
1.Administration and Finance of the East India company.
2. The evolution of provincial finance in British India,
3. the problem of Rupee its origin and solutions.

The Administration and finance of the East India Company provides a historical review of changes in administration and finance in East India company during 1792-1858 and depicts how those changes led to the sufferings of the Indian people at the hands of the British rulers. The key findings made in it were that to create PUBLIC DEBT OF INDIA  (even though having a budget surplus for 36 out of 60 years). The article mainly addresses the fact that the Indian debt created in India is greatest than that of the home debt created in England, this is because of the increased military expenditure by the government by as much as 45 to 65 per cent of the total budget and also due to the prohibitive trade policies imposed on the Indian manufacturers to England. As a result, the British Indian government has increased the land taxes by 54 per cent whereas in England it is only 10%. So Ambedkar condemned the entire fiscal system of East India company and stated that the Finances of a country should be judged from developmental activities and among the developmental expenditure public works should be given a prominent position.

The Evolution of Provincial Finance in India is a dissertation submitted by Ambedkar during his PhD at Columbia University. It reveals the evolution Centre-state relationship in British India from 1833-1921. Under the imperial system, the expenditure budgets were prepared by the provincial governments but the responsibility for finding the ways and means for financing them resisted with east India company. Failure of this system led to the evolution of Provincial Finance. In Provincial system, Ambedkar discusses three of systems namely Budget by assignment, Budget by assigned revenue, Budget by shared revenue. Under each type, Ambedkar discusses how were the revenues and expenditure system and at the end discusses what ought to be the system of relationship related to financial responsibility in different departments. This led to the establishment of Finance commission in our country which discuses about the structure of revenue sharing between centre and state.

Contribution towards Monetary Economics:

This is evident from his DSc dissertation The Problem of the Rupee: Its Origin and Its Solution. His major arguments are that Currency should not be linked with gold. Rather a pure gold standard to be followed where gold coins should be circulated along with paper currency.  This strongly went against the idea of John Maynard Keynes of introducing  Gold exchange standard. He is in fact of the opinion that gold exchange standard increases the chances of mismanagement by the government because the issue of money ‘’is authorized and conducted by men who are never under any present responsibility for private loss in case of bad judgment or mismanagement’’. Ambedkar argued that the amount of Mercantile should be linked with the wheel of Nature and stated that the gold exchange standard does not have the stability, currency which is a major concern for developing countries like India.  Instead of implementing the Gold standard, he drafted the recommendations and had submitted it to The Royal Commission on Currency and Finance ( or Hilton Young Commission ). The recommendations were as follows :
1. Stop the coinage of Rupees by absolutely closing the mints to the Government as they are to the public.
2. Open a gold mine for the coinage of a suitable coin.
3. Fix a ratio between gold coin and the rupee
4. Rupee not to be convertible to Gold and gold not to be convertible in Rupees, but both to circulate as unlimited legal tender at a ratio fixed by law.
The commission found this book and recommendations as an invaluable reference tool and thus the Central Legislative Assembly has passed these guidelines as the RBI ACT 1934.

Views on Agriculture and Poverty:

Ambedkar made extensive research on the problem of smallholdings in agriculture. The traditional definition of economic holding is given as “A holding which allows a man a chance of producing sufficient to keep herself and his family in reasonable comfort after paying his necessary expenses “. But Ambedkar rejected this idea of economic holding from the standpoint of Consumption rather than from the viewpoint of production and said in Economic Holding the mere size of the land is empty of all economic connotations.. it is the right or wrong proportion of other factors of production to a suit of land that tenders latter to the economic or uneconomic. The broader areas which Ambedkar want to bring the change in Indian Agricultural are included in the clause 4 of Article II of “states and minorities.

Nationalization of Industries:

Dr Ambedkar is of opinion that the fast development of India is impossible without widespread industrialization. According to him industrialization creates large- scale employment which in turn produces essential consumption goods for mass consumption along with capital goods that saves foreign exchange, utilizes raw materials on a proper scale leading to an all-round development of the country. But the private sector industries are unable to perform this task satisfactorily, even if they did that only creates monopoly and centralization of industries. Therefore the government should come forward to take up large scale industrial activities for the greater societal and national interest. The small and cottage industries should be kept in the private sector. The insurance and transport communications should be nationalized. The Right to strike should be given the labourers.
All the above provisions are included in the Directive Principles of State Policy after independence.

Views on tax policy:

Ambedkar expressed his views on taxation in the manifesto of the Swatantrata  Majdurparty, 1936. He was opposed to the land revenue system its system and other taxes as their burden mainly fell on the poorer sections of the society. He enunciated that the principles of taxation should be based on the payers capacity and not on the income. Further, the tax should be progressive with exemptions being allowed up to a certain limit. The land revenue tax should be more flexible and inequality between different sections in tax imposition should not be allowed.
The taxation policy of any country should lead to a fall in the standard of living of the people. Land revenue tax on Agricultural income is unjustifiable. Ambedkar argued about the abolition of Article 107 of the Land revenue code and to bring Land revenue tax in the fold of income tax. He argued that the Indian tax system if faulty due to the presence of high production tax, land revenue tax, excise duty and also it is based on the principle of Discrimination and inequality among various sections.

Strategy for Economic Development :

Eradication of poverty, Elimination of inequities and ending exploitation of masses should be the strategy for economic development. He accepted Marxian view in this aspect but did not favour him on the paradigm of development. D.R. Ambedkar views on communism are presented in his essay” BUDDHISM AND COMMUNISM”. Unlike Marx, Ambedkar did not accept the economic relationship as a be-all and end-all of human life. He emphasized exploitation has many dimensions, In fact, in the Indian context socio-religious is no oppressive than the economic exploitation.

Water resource policies :

 Ambedkar has taken a great policy initiative, when he was a cabinet minister of Labor, Irrigation, Power that formed the basis for the present-day water-sharing Dispute through  Central Water Commission(an apex body under the Central government GOI) and also led for the establishment of River Valley Authority ( to resolve the jurisdictional problems). He criticized the  Act of 1935 on the lines of Water as a wealth of Nation. He suggested an integrated approach for the optimal utilization of water resources. For that, an independent authority must be established giving the central government a greater role. He gave a legal approach framework for this approach while framing the constitution.  Later on, he implemented the work as per the policy framework that led to the establishment of Damodar valley project(in Bihar and West Bengal). He had for the first time suggested the interlinking of Krishna, Godavari and Tapti rivers.

Women empowerment:

“I Measure the progress of the community by the degree of progress which women have attained” By  Ambedkar.
Ambedkar was the champion of human rights. He promoted Equality and Fraternity in the society. He fought vigorously for the women rights and worked tirelessly to achieve the following
·        1.Gender Equality
·        2. Women education
·        3. Hindu code bill
·       4. Maternity Bill  -“ it is the interest of the nation that the mother ought to get a certain amount of rest during the pre-natal period and also subsequently, and the principle of the bill is based entirely on that bill”.
     Article 51A(e) imposes a fundamental duty on every citizen to renounce the practice derogatory to the dignity of women.
      Article 243D(3) provides that not less than 1/3rd of the total number of seats to be filled by direct election in every panchayat to be reserved for women, and such seats should be allotted by rotation to different constituencies in a panchayath.
The above two articles are solely intended to preserve women self-respect and to enhance their decision-making power that were guaranteed by constitutional provisions made by Ambedkar. Apart from the above-mentioned problems Ambedkar also made his strong analysis on free enterprise Economy, population control and family planning, the concept of Human capital and the opposition to Hindu economy.