Introduction
India remained a prosperous nation with achievements
of the highest order in economic fields since the ancient periods. Studies on the
earlier periods point out that the country was engaged in diverse
economic activities, including trade at the international level, about five
thousand years earlier. The earliest known treatises on economics were written
here in India for the first time in the world about twenty five centuries back.
Recent studies show India remaining as the economic
power house since the beginning of the Common Era continuously for several centuries,
making the economy the most sustainable one that the world has ever seen. It
was the colonial rule that destroyed the economy resulting in the country
becoming poor and underdeveloped. Meanwhile, the Europeans changed the
education system and reversed the discourses related to different fields of
importance. Like many other nations in the world, India was also made to accept
that only the Europe has the true knowledge in economics, finance and other
fields.
Independence provided the opportunity to set right the
distortions. Voices were raised for changes in the thought process, study of
economics and policy making. They are continued to be raised even today. But the
ruling and elite sections of independent India remain intent on following the west, for they believe
that only the West has solutions to offer.
See the contrast in China. Mohanty 1 notes: “Even in the height of
economic reforms in China and spread of western technology as well as cultural
forms in recent years the Chinese elite has emphasized “Chinese
characteristics” on every front. On the other hand, the Indian elite has
shortly assimilated itself with the various waves of Westernization in the
spheres of culture, economy and politics.”
Post-colonial Indian scholarship in economics and
finance remain West-centric, as it is believed that India does not have much to
present. As a result there are not enough discourses, debates and research from
the Indian points of views. This is in spite of the fact that the country has
been fast emerging at the global level with her performing systems. It is
really disappointing that the Indian scholarship in economics and finance does
not have original thinking to offer.
India
has a proud economic history
India is an ancient economy noted for superior
economic performance over long periods of time. French excavator Jean-Francois
Jarrige 2 noted that by 6000 BCE,
Mehrgarh, one of India’s most ancient settlements, had “a veritable
agricultural economy solidly established.”
Indus – Saraswathy civilization demonstrates that the country possessed expertise
in town planning, had commercial cities established and was engaged in vibrant
trade at the domestic and international levels.
Business and trade were being
conducted through different forms of organizations, some of which resembling the
modern western corporations and partnerships, at least twenty eight centuries
before. Khanna 3notes: “The corporate form (e.g., the sreni) was being used in India from at
least 800 B.C., and perhaps even earlier, and was in more or less continuous use
since then until the advent of the Islamic invasions around 1000 A.D. This
provides evidence for the use of the corporate form centuries before the
earliest Roman proto-corporations. ……. Moreover, when we examine how these
entities were structured, governed and regulated we find that they bear many similarities
to corporations and, indeed, to modern US corporations.”
Mahabharata provides us the details of
economic activities and the responsibility of the state for the overall economic
performance and prosperity of the society. The information provided by Kautilya explain the nature and
types of economic activities during those periods. The study by Maddison on the
performance of different economies in the world during the last two millennia reveals
that India was contributing 32.9 per cent to the global GDP, the highest share
by a country, during the beginning of the Common Era, i.e. 0 CE 4.
Maddison shows that India’s position as the most dominant
economy continued uninterrupted till 1600 CE, when China moved ahead briefly, to
be overtaken again by India a century later. There was a remarkable
sustainability in the ancient Indian economic systems over several
centuries. There is no other economy in
the world that showed such a high level of consistent performance in the
recorded history of the world. One important feature of the Indian economic system
was the fine balance that existed among the different sectors of the economy
and the higher performance of all the sectors. This aspect assumes significance
as the modern world does not know how to handle the different sectors of the
economy.
It is relevant to note that India’s outstanding
contributions in various fields were entirely due to her superior performance
achieved through the efforts of her people and the native systems that were in
place. Subsequently the entry of the European nations changed the entire
scenario. They used all sorts of methods to gain an upper hand. The colonial rulers
designed and implemented policies that destroyed the well -functioning native
systems. As a result, India had to lose her long held status as the premier
economy.
Scholarship
in Economics and Finance during ancient periods
Mahabharata
mentions:
“Agriculture, animal husbandry and trade are the very life of the people 5.”
It goes on to elaborate the responsibilities of the King to develop
infrastructure and provide the required facilities for people to carry on their
economic activities. The King was made responsible to create and ensure a
suitable environment for carrying on their vocations without difficulties. The
following types of questions were put by elders to the King to make him
understand his responsibility towards the economy6: “Have you ensured that the traders in the
country, who have to pass through many difficult terrains in order to exchange
goods …., are never put to trouble under the burden of oppressive exactions?” “Have you ensured that in every part of the
lands large irrigation tanks have been constructed, that these are brimming
with water, and that agriculture is not left at the mercy of the gods of rain
alone?” All these would not have been
possible without a proper understanding of the economy.
We do not have all the details of the ancient Indian economy
continuously since the earliest periods to make detailed analyses. We have to
remember that the practice of using measures such as GDP and growth rates to
study the performance of economies began only during the latter part of the last
century. Hence we have to rely only on related evidences for the earliest
periods. But fortunately details regarding the economic status and performance
of different countries/ regions in the world using the contemporary GDP calculations
are now available for the previous two millennia through the works of the OECD economic
historian Angus Maddison. Of course, there are many other evidences such as the
colonial records, studies by British
officials, information provided by foreign observers and local sources that
testify the superiority of the Indian economic systems for different periods.
The available evidences reveal the following facts.
1. India
is an ancient economy with a very long track record.
2. India
remained a pioneer in different fields and excelled in global trade about five
thousand years ago.
3. For
more than three-fourth of the period during the last two millennia, India was
the most powerful economy in the world.
4. India remained
a prosperous nation with diverse economic activities and contributions of a
very high order from different sectors.
5. India lost her premier status only from the
eighteenth century due to exploitation by the Europeans.
6. India
is perhaps the most sustainable economy in the recorded history of the world. China
also has a very good record in this respect and it remained as one of the top
two economies till around the middle of the nineteenth century.
7. All her achievements in the economic sphere were due
to her own efforts, without taking undue advantage of others.
8. India
emphasized ethical principles and higher values in all economic and business
transactions.
The above facts underline that the Indian economy had
been functioning with unique features. The economy would not have functioned
very successfully for several hundred years continuously under different rulers,
without strong fundamentals and proper systems in place. We have often heard about
the ‘village republics’, of villages functioning as independent units with a
high level of economic self-sufficiency, irrespective of the rulers. Hence Indians
must have had strong ‘economic sense’ with a clarity regarding their duties and
responsibilities. For such a situation
to have existed, our ancestors must have had a clear understanding of economics
and should have evolved suitable frameworks to put the ideas into practice.
Arthashastra, written about
2300 years ago, is the first
available work on economic science. It is also the first work of its kind in the
world. But the author Kautilya was not the originator of the subject, as he
himself had acknowledged several treatises of earlier times in his work. Rangarajan
7 notes: “There are in all hundred and twelve places in the text where a
number of earlier authorities and opinions held by them are mentioned. .… From a number of quotations and references
in later works, we know that there were at least four different schools and
thirteen individual teachers of Arthashastra
before Kautilya. Unfortunately, all the earlier works are lost and
Kautilya’s is the earliest text that has come down to us.”
Hence economic science and its study must have started
much earlier. Quoting scholars, Rangarajan notes that the development of
economic science “may have started around 650 B.C 8.” Though the exact period of development is not
known, it can be safely taken that it originated in India with many scholars
contributing to its development with diverse opinions over a period of time.
Now looking back at the Indian economy against the backdrop of the latest
details available before us, we have reasons to believe that a proper
understanding of the economy by our forefathers and the development of economic
science as study have helped them to perform well to the best of their
abilities.
Economic transactions, especially at the larger
levels, require the knowledge of finance. Large scale businesses and trade
necessarily involve knowledge about the intricacies of finance and the use of
financial mechanisms. India being a successful nation with a long history in
global trade must have possessed the required knowledge for transactions with
other countries. Economic success at the international levels would not have
been possible without the knowledge of finance.
Evidences point out that ancient India possessed a
higher level of knowledge in finance. In the Mahaabharata, Narada asks
Yudhistra 9: “Have you ensured ….. , they ( the cultivators) are
offered loans at the rate of one percent? ” Such a serious question would not
have been directed to the King without any knowledge on loans and interest
rates. The following lines from Arthashastra
reveal the expertise of ancient India on state finance10: “All (state)
activities depend first on the Treasury. Therefore, a King shall devote his
best attention to it.” “A King with a depleted Treasury eats into the very
vitality of the citizens and the country.” Arthashastra
goes on to discuss different
financial aspects related to the affairs of the
state and the people, such as sources of revenue for the state, budget,
forms of account, audit, deposits, pledges and mortgages, among other things.
Khanna notes that in the ancient Indian sreni form of organizations, there were
liability insulations and sharing of assets and liabilities 11. Quoting
sources, Das mentions the usage of letters of credit by merchants and earlier
version of the modern bills of exchange during the Mauryan periods12.
He notes further that during 300 BCE to 200 CE, guilds “served roughly speaking
the functions of modern banks.13” All these indicate a high levels
of expertise in finance during the ancient periods.
Colonialism,
Indian economy and Indian Economics
The following
table presents data relating to the share of India in global GDP.
Share of India in World GDP
(percent of the world total)
1700
|
1820
|
1870
|
1913
|
1950
|
24.4
|
16
|
12.2
|
7.6
|
4.2
|
Source:
Maddison, 2003, p.263
The above figures
show the drastic decline of the Indian economy due to the destruction by the
alien forces. The native systems that were built and nurtured by our ancestors over
several centuries were destroyed. We were told that our beliefs, customs,
traditions, ways of life and thoughts were inferior to that of theirs. The
introduction of the new education system facilitated the process quickly. West-centric
ideas were inculcated at all levels. The educated and the elite began to look
at India through the western glasses, resulting in the loss of original
thinking.
Independent
India depends on the West for economic policies
Independence provided the opportunity to set right the
distortions and begin a fresh lease of life based on the ethos and experiences
of this age-old civilization that remained a pioneer to the rest of the world
and conquered nations through her native thoughts and higher achievements. But
unfortunately the ruling establishment of independent India preferred the
socialistic approach. Socialistic ideology got developed in the west during the
nineteenth century based on their limited world views as a reaction to the
conditions prevailing in Europe. It is not that our policy makers were
completely unaware of an Indian approach. Personalities like Mahatma Gandhi advocated
India-centred approaches for a long time. Nationalists such as Ranade were vehemently
opposing the policies of Europeans for India.
Ultimately the policies that were adopted by the state
between the 1950s and 1980s could not give the expected results. Meanwhile
communism collapsed in the then USSR leading to the breaking up of the country
into many pieces. The advocates of western capitalism led by the US seized the
opportunity to propagate that theirs was the only ideology suitable for
progress. Much of the elite and educated sections in India were also pitching
for the market- centric approach. As a result for the second time after
independence the policy makers went in for the other western model, without taking
into consideration the background, priorities and preferences of the nation.
The results are there for all to see. After more than sixty
years of independence, the country is not able to fulfill even the basic
minimum facilities for all her citizens. Thousands of farmers are committing
suicides every year continuously during the recent period. Employment
generation has been going down in spite of higher growth rates. The consumer
culture has begun to intrude the lives of critical sections of the society.
This is the situation in the nation that possesses enormous strengths in terms
of her experience, culture, resources and potential.
Status
of Scholarship in Economics in Independent India
The critical sections of the country that dominate the
economic discourse and policy making remain dependent on the west. The position
continues in spite of the repeated failures of the western paradigms and approaches
in their own birth places and practicing grounds. As a consequence, the experts
from the western world itself have begun to admit the limitations of their
theories during the recent years. Nobel
laureate Paul Krugman 14 writes: “
…. much of the past 30 years of macroeconomics
was spectacularly useless at best and positively harmful at worst.”
But still the dominant Indian scholarship depends on
the west for their inputs and opinions. It is mostly those who have had their
education in western universities who dominate the leadership positions in the premier
educational institutions and policy making in India. The position in the top
ranking institutes of management is much worse. They expect western degrees for
appointment in senior positions. This situation continues even after sixty four
years of independence.
Meanwhile linkages with western institutions have
increased during the recent periods. One interesting trend is they themselves
are now coming in to India to establish linkages. The numbers of Indians as
members of faculty in the western academic institutions have been increasing.
More number of them are beginning to occupy senior positions, especially in
areas such as management.
Lack
of appreciation of India’s achievements
There is a
complete lack of appreciation of India’s achievements. This is because we
neither have a proper understanding of the economic history of India nor an
idea about the contemporary functioning Indian models. We do not even have the
basic idea that a country with such a long history would not have survived so
long without economic fundamentals. Kumarappa
15noted: “The old civilizations of Egypt, Babylon, Greece and Rome
are no more to tell their tale. ….. In striking contrast to these, the equally
old or even older civilizations of China and India, which were founded on
altruistic and objective values, testify even to this day, their vitality and
other attributes of permanence and non-violence in their civilization.”
There has been no initiative to study and understand the
economic history from an Indian perspective as our scholarship takes it for
granted that we do not have a past worth studying. This is the height of
apathy, lack of appreciation and even a kind of ‘negationism’ that permeates
the thought process of our scholars. But
they accept whatever is presented to them meekly, when it is concerned with the
claims of superiority of the west, specifically in fields related to economics
and finance as they are “developed” and “rich”.
Much of the
details relating to ancient India that we have gathered in the recent
periods have come through the western
scholarship. We do not have any role in their initiatives. It is all the more unfortunate
that we do not even discuss their findings openly, as most of us do not have
the objectivity and confidence to accept them.
Maddison’s findings have given new image for India and China, validating
their long held positions and placing them at the centre stage in the economic
history of the world, paving way for a true understanding of the global
economic order. How many universities in India have organized programmes
presenting such facts for discussion?
As a result, there is no idea about the Indian thought
process in economics, in spite of her long economic history and achievements
over all these years. Hence, Gupta16
notes: “Indian economic thought is relatively little known either in India or
elsewhere.” So we are producing graduates and scholars who are tutored through the
western views, negating India’s past. There is a complete failure on the part
of Indian scholarship regarding economic history.
Not
aware of contemporary functioning systems
It is even more unfortunate that the Indian
scholarship continues to look at the contemporary economic systems through the
western glasses. There remain the two schools of scholars, namely those who
subscribe to the leftist approach and those who support the market philosophy. The
Marxian ideology has failed worldwide. The market ideology has been facing
serious crisis, losing its validity. It has created more problems at different
levels, threatening the very meaning of a peaceful life in the society. Experts point out that the market
fundamentalist approaches disturb families, societies, nations and the
environment. Marglin17 notes:
“But over the past four hundred years, the ideology of economics has fostered
both the self-interested individual and the market system, and has undermined,
and continues to undermine the community.”
Both the above approaches are two sides of the same
coin and the adherents of both the schools follow the same methodologies for
their studies. Bhole18 notes: “Both of them have been engendered and
nursed by the same mechanistic Western world-view, Western value system,
Western life-view ( life style) which lacks the holistic and ecological
perspective. This world view has been developed by Newton, Descartes, Calvin,
Darwin, Freud, Smith, Marx and other scholars of the same ilk. Both the philosophies
are the product of the same age namely, the age of “enlightenment”,
“renaissance”, “rationality”, and industrial revolution….. The mainstream
economic theories of utility, margin, utilitarianism, division of labour,
labour theory of value, falling rate of profit, disutility of labour, and so on
constitute the basis for both of them. … They use the same mode of analysis
involving binary, either/or, mutually exclusive, dualistic, reductionist,
positivistic, and fragmentary thinking, concepts and methods. Both of them
emphasize the necessity of the quantitative measurement or operational
verification of the values.”
In spite of the failures of both the approaches, the scholars
of the two schools refuse to acknowledge the realities. It is a fact that with
all the limitations, India has been making progress, in spite of the confusions
and contradictions at the policy making levels. But the scholars are still looking to the west, not knowing
as to what should be the proper approach for India. The country has been
growing, already emerging as the third largest economy in the world. It is
interesting to note that both the above schools make claims that the growth of
the economy has been due to their prescriptions, little realizing that this
country has enormous strengths and moving power that remain invisible to the
naked eyes.
Objective studies at the ground level reveal that
Indian economy has unique fundamentals 19. Factors such as the
family system, community orientation and cultural traditions play a huge role
propelling the economy to move forward. Higher levels of saving, self-employment
base, high levels of entrepreneurship and employment generation are not due to
inputs from higher educational institutions or encouragement through the policies
of the state, but due to the initiatives and enterprise of people from the
ordinary backgrounds. The Indian scholarship is not inclined to study them, as
they hesitate to look at the functioning economy from broader perspectives.
All countries are not the same. One cannot truly
understand Asia, Africa and Gulf through the European and the US centric views.
It is all the more true for India, with people from diverse backgrounds, habits
and practices. While arguing against the Euro centric policies for India, Ranade,
himself not an economist by training, voiced his concern long back based on his
understanding of the situation: “With
us an average individual man is, to a large extent, the very antipodes of the
economical man. The family and the caste are more powerful than the individual
in determining his position in life. Self- interest in the shape of the desire
of wealth is not absent, but it is not the only nor principal motor. The
pursuit of wealth is not the only ideal aimed at. There is neither the desire
nor the aptitude for free and unlimited competition except within certain
predetermined groves or groups. Custom and State regulation are far more
powerful than competition, and status more decisive in its influence than
contract 20.”
In this context it is interesting to note that many western
universities, business schools and research bodies are taking interest to study
the Indian business and corporate sectors, during the recent years. Even these
studies, with all limitations, have pointed out some of the underlying
strengths of the Indian economy. The ‘functioning economy’ of contemporary
India remains in many ways different from the text book economy that our
scholars and policy makers study and use for discourses and decision making
purposes. But it remains untouched, in spite of India’s continuous progress during
the past six decades, withstanding the global turmoils and policy failures.
Western
financial discourse completely dominates
the Indian scholarship
With the ascendancy of the market fundamentalism in
the west, particularly the US, the financial markets began to dominate the
economic system. The academic system introduced newer courses in finance.
Simultaneously many new theories and models came into existence. With the
result financial markets became perhaps the most researched field in economics
since the 1970s. Most of the Nobel prizes in economics during the 1980s and
1990s went to those who participated in the study of financial markets. Those studies were ‘exported’ to the rest of
the world through their courses, text books and other methods.
Business schools and universities in India, with the
‘west is best’ mindset, accepted those theories without questioning. Even now,
institutions of higher learning compete among themselves to offer specialized
finance courses that discuss the western models. It is considered a privilege
to teach and study such courses. As a result almost all the colleges in the
country, including many of those situated in rural areas, offer ‘modern finance’
courses in their curriculum.
India remains one of the financially strong nations. India has one of the high saving rates in the
world. Almost the entire investments required for businesses in the
non-corporate sector are generated locally by the entrepreneurs though their
network of families and communities. The role of foreign investments is very less
in the economy. India is one of the very few countries that withstood the
recent financial crisis, even when most of the richer countries faced severe difficulties.
All these are due to the unique financial systems prevailing in India.
But our scholars do not take steps to study and
understand them. Much of their expertise revolves around stock markets, leaving
a very vast area outside the scope of study. So we produce reports after
reports on a few topics such as ‘efficient markets.’ In this connection, it may
be relevant to reproduce two sentences of Munger, the Vice-Chairman of the
Berkshire Hathaway, the most successful investment company in the world, from
his convocation address 21. They
bring out the limitations of the much acclaimed theories related to the
financial markets and their lack of relevance at the practical level. To quote:
“Well, Berkshire’s whole record has been achieved without paying one
ounce of attention to the efficient market theory in its hard form. And not one
ounce of attention to the descendants of that idea, which came out of academic
economics and went into corporate finance and morphed into such obscenities as
the capital asset pricing model, which we also paid no attention to.”
Conclusion
India has a very long and successful economic history,
with most probably the best economic model the world has ever experienced. Her understanding
and expertise in economics and related subjects is critically important for us,
as we can learn much from earlier experiences. Similarly we need to have a correct
understanding of the contemporary economic functioning from the nation-centric
perspectives. But unfortunately the scholarship on economics and finance remain
west centric. There have been no worthwhile initiatives, not even sincere
attempts, for discourses, debates and research on the suitability of the
western thoughts and the need for India- specific approaches, as there is a
near-total failure on the part of Indian scholarship in Independent India. It may
be relevant to recall here that during freedom struggle, the economic thinking
of the nationalists went almost towards Indian economic thoughts. But they “could
not grapple with theory per se” as
they were not professional economists22. They challenged the western
classical economics primarily because the rulers used it to oppose the nationalist
demands.
The global economic and financial systems are in
serious crisis. The western theories stand exposed. At this juncture, we are
fortunate that India has strong fundamentals and functioning systems. But the Indian
scholarship has miserably failed and let down the nation. It is time that it realized
its blunders and shifted its focus, before it is too late. For our continued survival
as a great nation, we have to maintain our identity, which is closely linked to
the economic thoughts and behavior of our people.
References
1. Mohanty, Manoranjan, “Colonialism and the
Discourse in India and China” in Tan Chung, In
the Footsteps of Xuan Zang: Tan Yun-Shan and India, Indira Gandhi National
Centre for Arts, New Delhi, 1999
2. Jean-Francois
Jarrige quoted in Michel Danino, ‘Indian History and Civilization: Recent
Discoveries and Their Significance’, Paper presented at the National Symposium
on Philosophy and Practice of Education for India, Calcutta, Nov.2004
3. Khanna,
Vikramaditya S., ‘The Economic History of Corporate Form in Ancient India’,
1997. http://ssrn.com/
4. Maddison,
Angus, The World Economy – A Millennial Perspective,
Overseas Press (India) Private Limited, New Delhi by arrangement
with the Organization for Economic Cooperation and Development 2003, p.263
5. Srimahabharatam, Gita Press, Gorakhpur quoted in Bajaj J and Srinivas
M.D., Annam Bahu Kurvita, Centre for
Policy Studies, Chennai, 1996, p.121
6. Quoted
in Bajaj J and Srinivas M.D., op.cit., pp.121-122
7. Rangarajan,
L.N., Kautilya- The Arthashastra, Penguin Books, New Delhi, 1992, pp.3-4.
8. Rangarajan,
L.N., op.cit.p.4
9. Quoted
in Bajaj J and Srinivas M.D., op.cit., p.122
10. Rangarajan, L.N., op.cit., p.222
11. Khanna, op.cit., p.26
12. Das, Santosh Kumar Das, The Economic History of Ancient India, Vohra Publishers and
Distributors, New Delhi 1980, p.104
13. Ibid., p.132
14. Krugman, Paul., ‘What Went Wrong With Economics’, quoted
in The Economist, July 16,2009
15. Kumarappa, J.C., Economy
of Permanence, Sarva Seva Sangh Prakashan, Varanasi, 1997, p.40
16. Dasgupta, Ajit
K., A History of Indian Economic Thought,
Routledge, London, 2003, p.3
17. Marglin,
Stephen A., The Dismal Science: How Thinking
Like An Economist Undermines Community,
Oxford University Press, New Delhi, 2009,p.1
18. Bhole,
L.M, Essays
on Gandhian Socio-Economic Thought, Shipra Publications Delhi, 2000,
pp.47-48
19. Kanagasabapathi,P., Indian Models of Economy, Business and Management, PHI Learning
Private Limited, New Delhi, 2012
20. Ranade quoted in Das Gupta, Ajit K., op.cit.,
pp.112-113
21. Munger, Charles ., “Academic Economics: Strengths and
Faults After Considering Interdisciplinary Needs”, Herb Kay Undergraduate
Lecture, University of California, Oct 3, 2003
22. Bipan Chandra, The
Rise and Growth of Economic Nationalism in India, Anamika Publishers and
Distributors Ltd., New Delhi, 2004, p.350
(Published in Dialogue- Special Issue on Post- Colonial Indian Scholarship in Humanities and Social Sciences, Vol.13, No.4, New Delhi, April-June
2012)
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