The Hindu Business Line : Relevance of Gadgil's economics

THIS is the birth centenary year of Dhananjaya Ramachandra Gadgil, one of the most outstanding economists of modern India. Gadgil was born in April 1901, the year Mahadev Govind Ranade died. The Ranade tradition of Indian economics was carried forward by Professors G.Kale and Gadgil, which holds that the social and economic conditions of India, even as they are evolving, require a special brand of economic thinking suited to these conditions. N. V. Sovani, the great disciple of Gadgil, has even upheld the standpoint that the specificities of Indian social, economic and political environment do warrant a distinct Indian science of economics.

Throughout his writings, Gadgil, who literally founded the Gokhale Institute of Politics and Economics, paid special attention to the local-, regional- and even village-specific social and economic peculiarities of different activities. According to his general position, these specificities of micro level environments were neglected by the generalised approaches to economic policies at the central or international levels. His `Industrial Evolution of India', published in the early 1920s and which ran into more than five editions, looked at the problem of industrial change in India in the setting of the technological revolutions taking place in Britain, France, Germany, etc.

He reached the position that the adverse domestic consequences of technological changes in these countries were being transferred to such countries as India. Consequently, displacements and dislocations were continuously taking place in the Indian economic process. The periodic shocks occurred elsewhere but the brunt of the disequilibrium was mostly felt in such nations as India.

In his most probing presidential address to the Indian Economic Association, delivered at the Mysore Economic Conference in 1941, Gadgil made a frontal assault on the then fashionable universality and cosmopolitan nature of the theory of economic policy as was being propagated in the West. Technological changes, argued Gadgil, would lead to large bursts of unemployment. Unless a country had a high rate of growth and prosperity, unemployment would occur continuously and people would be deprived of old patterns of livelihood.

A changing economy was continuously in transition and in such transitions the adverse effects would also be continuously felt. Gadgil used the example of how British administrators evolved a policy of public works during periods of famine as a departure from laissez faire under Indian conditions. Gadgil argued that what was required was a continuous programme of public works all over the country to provide a cushion against insecurity and loss of livelihood. He especially paid attention to the incessant distress in rural areas consequent upon continuous external shocks in policies.

Whereas Ranade earlier had challenged the theoretical basis of classical economics, Gadgil challenged the hypothesis underlying the general framework of a universal economic policy. He examined the relevance of the latter in the fields of rural credit, regulation of wages, industrial location and related spheres. Gadgil also took up cudgels against Harrod's proposition that if A prefers X to Y, it follows that A should be given X rather than Y. Gadgil's point was that society had also an interest in the pattern of preferences, for example, A may prefer tobacco and drugs to say tea and food. Should society sanctify the preferences of A? Gadgil was trying to show that the basic criterion justifying consumers' sovereignty was faulty. There were social diseconomies in individualistic consumption and production preferences. Individual preferences cannot be held always as decisive. Gadgil also supported that in monetary policies the interests of each country had to be taken into account and there was no universal theory of monetary policy.

Gadgil also took the view that for most poor producers as in agricultural commodities and the self-employees in the informal sector, prices of commodities and services had to be stable to secure minimum livelihoods to the millions concerned. The pricing system also determined the pattern of distribution and the latter was embedded as a condition of production in the case of millions of producers in India in agriculture and related occupations, including handicrafts and the small-scale industry. This point of view was rather unorthodox as in traditional western theory production and distribution are generally separated. Gadgil's main opposition to the trader-lender nexus in the rural sector came from this angle. There was very little left for the producers as the bulk of the margin was taken away by trader-lender groups. In fact, even land was getting alienated.

In the most profound article that Alfred Marshall wrote on the value theory, he held the view that in most productions, distribution and exchange were inter-linked. Since exchange is a condition of production in many cases, Marshall's point of view was a critique of the theories separating distribution, exchange and production. In Sraffa's production of commodities, a portion of wages is embedded in the production scheme itself. Gadgil's thesis, that is so relevant in India now that farmers' suicides are becoming common and there is a ground level protest against the World Trade Organisation obligations, had a substantial theoretical underpinning.

We referred to the relevance of Gadgil's ideas concerning the micro impact of macro policies adopted at central levels. There is a movement building up in agriculture and allied sectors, small industry, etc, against the local impact of globalisation and openness. There is no cosmopolitan theory of economic policy. In fact, there is no cosmopolitan economics as such. Gadgil once referred to the inferiority complex of Indian scholars in economics for their uncritical acceptance of opinions of foreign scholars, probably relevant for their own countries, but certainly not relevant in the Indian setting. We must examine why Gadgil failed at Delhi? He must have come up against the brand of cosmopolitan economics in the bureaucracy and alleged expertise then in the Planning Commission itself and as in the advisers to government ministries.

Indian economics has a rich tradition. Even economists such as Lewis and Nurkse had recognised that the Indian scene had specificities and heterogeneities in its geographical, historical, political, economic and social settings, which warranted the Indian economy as a separate subject in economics. Indian economists have always been historically challenging the postulates of mainstream economics in theory and policy. Gadgil's ideas are a rich legacy in this tradition. That he named his Institute as one of politics and economics is also a noteworthy point. Is it not true that it is politics even now that is pushing the donkey cart of economics? And is there an economist in India who can lay his hand on his heart and say that economic considerations are the most dominant in the policy formulation in the Indian setting?

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