India has been a famous pioneer of economics in the early period. The Arthashastra is a treatise which is celebrated as one of the greatest works on governance. However, the subsequent economists that followed have been lost in history. India has had an illustrious past in terms of economic advisors guiding the power structures and establishments of the time.
A few foreigners have played a prominent role in economic policy in India. James Steuart, later known as Sir James Steuart Denham, 4th Baronet, is considered to be the first Economic Advisor to the ‘Government of India’. The Scottish economist was the leading expositor of mercantilist views. He was an advisor to the East India Company, and wrote a book titled, The Principles Of Money Applied To The Present State Of The Coin Of Bengal. Even though the position of the economic advisor ended with his tenure, economists such as Thomas Malthus and J.S. Mill continued to play a critical role in the policies of the Company.
Ralph Whitenack, a little known American economist, served Sayajirao Gaekwad III, the Maharaja of Baroda. The first time the Maharaja met the economist was in 1906 during the Gaekwad’s visit to America. Ralpha Whitenack was a professor at Brown University at that time. It is said that on seeing the ‘Yankee importunity’ of the professor, Sayajirao invited Prof. Whitenack to Baroda to be an advisor. This move was not well received by the British in the state. Major Pritchard felt a risk of “possible meddling by him in the political affairs of the state”. On November 27th 1906, the Amatya (Dewan) of the kingdom, R.C. Dutt, issued the order appointing Whitenack as “expert advisor in matter relating to the industrial development of the state”, effective from November 3rd 1906. Whitenack was the first American to be employed in India in a non-teaching position.
It is interesting that an American was appointed as an advisor in an area where British talent was widely available. One of the reasons cited is the perceived conflict of interest. While there was an alignment of goals in areas such as engineering and architecture, the areas of economic interest such as banking and industry were approached with a perceived threat. The goals of the British and those of the kingdoms might not have been in sync. There was also a critical advantage Whitenack had over the British, given his hands-on experience in setting up and operating industries in the US.
Despite being industrially progressive, the state of Baroda was heavily underbanked. The Maharaja realized this was looking at ways to expand the banking network in the state. Whitenack proposed the setting up a bank called The People’s Bank of Baroda’ By allowing other banks to set up their branches, the threat of deposits being taken from here for credit creation elsewhere posed a threat to the state. Hence, he built consensus among the traditional banking community of ‘shroffs’ to help set up the bank and raise capital. There was a lot of debate between the government, the private sector and Whitenack, as a large sum was required in setting up the bank. Whitenack pleaded the government to view the money they invested in the bank as “to help people in their industrial pursuit” rather than viewing this as a tool to raise money for the state. On July 19th, 1908 a public meeting was held to reach consensus, and the next day, the bank was incorporated under the Baroda Companies Act with the patronage of state. People of the state were given a preference in the allotment of shares.
The British government in India started appointing economic advisors in the 1930’s. The Government of Punjab appointed B K Madan as an economic advisor in 1935. In 1937, Theodore Gregory was appointed as the economic advisor to the Government of India. After independence, Gyan Chand was appointed the first economic advisor to the Government of India.
The position of the Chief Economic Advisor (CEA) was created in 1956 by C D Deshmukh. JJ Anjaria was appointed to fill the prestigious position. Since then, this position has been held by many illustrious personalities. Former Prime Minister Manmohan Singh held the position from 1972-1976. Bimal Jalan, Kaushik Basu, Raghuram Rajan have occupied the post in recent times and have been recognized across the world for their mastery over the subject. The current Chief Economic Advisor is Arvind Subramanian, a contemporary of Raghuram Rajan. He has redefined the position of CEA by not only engaging policy makers, but also engaging academicians across the country to raise the level of economic research and set priority areas. His course at IIT Delhi is extremely comprehensive and covers numerous aspects of the Indian economy.
The tradition of economic advisors in the nation continues to be carried on by extremely accomplished and erudite practitioners.
-Contributed by Bhargav Dhakappa
Picture Credits: foreignaffairs.com