The early twentieth century
The growth of neoclassical economics in the twentieth century has had significant impact on Indian economists. As argued controversially by Parthasarathi (2012): ‘the growing influence of neoclassical economics and its universalization has eliminated the need for a historical approach in contemporary Indian economics'.
Many leading twentieth-century Indian economists, either directly or indirectly, were trained in Western ideas, especially at the London School of Economics (LSE), Cambridge and Oxford. Individuals like Harold Laski, Lionel Robbins, Joan Robinson, Hicks, Kaldor, Allen, Lerner, Kalecki, Shackle, Karl Popper and Friedrich Hayek were all major influences. Early Indian economists and others who studied at the LSE included B.R. Ambedkar, B.R. Shenoy, Sardar Tarlok Singh, V.K. Krishna Menon, K.R. Narayanan, Minoo Masani, C.R. Pattabhiraman, R.K. Amin, Mahesh P. Bhatt, and C.D. Rajesvaran. Many were influenced by Laski's school of politics and economics. Ramachandra Guha (2003) explained that ‘LSE did indeed have a deep impact on the policies and politics of independent India. I forget who it was who said... that “in every meeting of the Indian Cabinet there is a chair reserved for the ghost of Professor Harold Laski' ”. P.G. Mavalankar, who studied under Laski in England, founded the Harold Laski Institute of Political Science in Ahmedabad in 1954 with funds from the Indian government.The Department of Economics at the University of Madras was one of the earliest established in India in 1912. Subsequently, the Department of Economics at the University of Allahabad and the University of Calcutta were both created in 1914 (the university was inaugurated by H. Stanley Jevons in 1915). The Department of Economics of the University of Mumbai was established in 1921. At College level, the Sydenham College of Commerce and Economics was created in 1913 and is also one of the earliest colleges created in Asia.
Similarly, the Department of Economics at St. Agnes College in Mangalore in south India was one of the oldest departments established in 1921.Alongside this growth of economics departments, in the first half of the twentieth century, colonial India produced several economists of repute who anticipated debates in development economics well before it became part of the mainstream. J. Krishnamurty (2009) has studied ‘the lives and careers of the first generation of Indian professional economists', who did cuttingedge work on what was later to become development economics. He traced contributions made during the period 1900-45 by B.R. Ambedkar, Brij Narain (1889-1947), L.C. Jain, C.N. Vakil (1895-1979), Radhakamal Mukherjee (1889-1968), Rajani Kanta Das, Jehangir C. Coyajee (1875-1943), V.G. Kale (1876-1946), Gyanchand (1893-1983), P.J. Thomas (1895-1965), P.S. Lokanathan (1894-1972), V.K.R.V. Rao (1908-91) and B.P. Adarkar (1903-88). For example, in a 1929 paper on indigenous banking, L.C. Jain lamented the slow but sure disappearance of many indigenous banking systems which were centuries old, and the loss of ancient banking methods and practices which, if retained and judicially mixed with modern developments, could be a source of strength to the Indian banking system as a whole.
Brij Narain contributed something distinct on universalization. He said in 1934 that ‘the study of economics, coupled with careful observation of facts, shows that economic life and development are governed by laws of universal validity. This realisation has not yet come to India'. Narain was influenced by economists like W.E. Weld and Othmar Spann, who rejected the idea of economics tailored for each country. A year before India attained independence, Narain published a book on The Economic Structure of Free India (1946), where he argued for the appropriate type of economic system that India should adopt, after rejecting Gandhi's village Swaraj system. Narain considered two basic systems, laissez-faire and the planned economy.
B.R. Ambedkar (1891-1956) was an authority on Indian currency and banking in the early decades of the twentieth century. He was familiar with the works of Carl Menger, but he remained independent, favouring empiricism and logic, rather than any particular system or ideology (Chandrasekaran, 2011a). Ambedkar pursued Gokhale's idea of free banking when he was studying at the LSE for his PhD, completed under Edwin Cannan.
One of Ambedkar's most illuminating works was the Statement of Evidence given before the Royal Commission under Hilton-Young on Indian Currency and Finance 1924-5. Ambedkar said:
one of the evils of the Exchange Standard is that it is subject to management... by adopting the convertible system we do not get rid of the evil of management which is really the bane of the present system... When the management is by a bank there is less chance of mismanagement. For the penalty for imprudent issue... is visited by disaster directly upon the property of the issuer. But the chance of mismanagement is greater when it is issued by Government because the issue of government money is authorised and conducted by men who are never under any present responsibility for private loss in case of bad judgment.
His recommendations for free banking were ignored not only by the Commission but also the Indian government. The Commission submitted its Report in 1926 and its recommendations were instrumental in the establishment of the Reserve Bank of India.
Ambedkar was trained in the West, receiving a Masters' degree in economics from Columbia University in 1915. His major works included: Administration and Finance of the East India Company (1915), The Problem of the Rupee (1923), The Evolution of Provincial Finance in British India (1917) and Provincial Decentralisation of Imperial Finance in British India (1921). Many of his ideas reflected a path-breaking interest in the Austrian school of economics (Chandrasekaran, 2011b). There is a close similarity between Ambedkar's ideas and those of Carl Menger, Ludwig von Mises, F.A.
Hayek and William Graham Sumner. Ambedkar was one of the earliest Indian economists to understand the central issue of the use of knowledge in society. His theory of free banking was built on Menger's works as well as Gokhale's treatise on finance and money. Ambedkar's (1947, 279) view of the distinguishing differential quality of money (its almost unlimited saleableness) was influenced by Menger's idea of the sale-ability of money, as expressed in his 1892 article ‘On the Origin of Money'.Further, Ambedkar understood the impossibility of a successful centralized administration or planning for British rule in India in a society so extensive and diverse. Taking into account the Hayekian knowledge problem, Ambedkar advocated an absolute form of decentralized planning. In his thesis ‘The Evolution of Provincial Finance in British India', Ambedkar (1925, 179) said ‘a Central Government for the whole of India could not be said to possess knowledge and experience of all various conditions prevailing in the different Provinces under it. It, therefore, necessarily becomes an authority less competent to deal with matters of provincial administration than the Provisional Governments'. Ambedkar also made important contributions to development economics; a paper published in 1918 ‘on the problem of small holdings in Indian agriculture is almost prophetic in its anticipation of several themes in later development economics, including the existence of disguised unemployment in farming. He showed why India needs to industrialize to absorb this surplus labour' (Rajadhyaksha, 2013).
B.K. Sarkar was one of the most prominent Indian social scientists of the period before independence (Sen, 2013). In 1925, he started as a lecturer at the Department of Economics, University of Calcutta, and in 1947 he became a professor and head of the department. Sarkar published works on a variety of topics, and edited two leading journals, Economic Progress and Journal of the Bengal National Chamber of Commerce.
Further, he was one of the early founders of the Indian school of sociology. His major writings included: Economic Development (1926), Studies in Applied Economics and World Economy (1932), Indian Currency and Reserve Bank Problems (1933) and Imperial Preference vis-a-vis World-Economy in Relation to International Trade and National Economy of India (1934).Radhakamal Mukherjee was Professor of Economics and Sociology of the University of Lucknow. He wrote 50 books ranging from rural studies to class analysis, personality theory to regional ecology, population problems to mysticism and Indian arts (Celarent, 2013), and he was one of the leading economists of modern India. His early work dealt with issues of ‘Indian' economics and its relation to universal economics. Mukherjee published various books including: The Foundations of Indian Economics (1916), Principles of Comparative Economics (1921), Borderlands of Economics (1925), The Institutional Theory of Economics (1939), Economic Problems of Modern India (1939), The Economic History of India, 1600—1800 (1940) and The Culture and Art of India (1959). In The Foundations of Indian Economics, he said that ‘in India we have heard and seen enough of theories as well as practices attempting to force economic systems and methods which have not been wholly successful in the West, but which are unsuited to the socioeconomic traditions of the country... the time has come for a clear analysis of the social and ethical ideals of India to which all economic institutions must be adapted'.
Mukherjee was an early proponent of the Indian family thesis: ‘Founded on the virtues of affection and self-control, this system tends to develop a spirit of self-sacrifice, and mutual control and dependence, which are quite opposed to the competitive individualistic spirit... while in the West it is the individual's own scale of wants, his standard of comforts... which regulates the growth of the population, in India the family mode of enjoyment or standard of life is the main factor'. Mukherjee was also a proponent of Institutional economics in India (Sinha, 1992), and he was strongly influenced by Veblen, Mitchell, Commons and Hobson. In his book The Institutional Theory of Economics (1939, 89), Mukherjee wrote that ‘Institutional economics deals not only with the abstract laws governing the relations between restricted or scarce goods and satisfactions or services, but also with the entire social and institutional structure and standards which blend and interpenetrate with and over-reach economic values'. He was an Intuitionalist but in a less-developed context.