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Monday, April 14, 2014

History of Economic Thought and the Discipline of Economics in India

History of Economic Thought and the Discipline of Economics in India

M. Usha 1341802

Economic phenomena are diverse and the structures of economies are essentially dynamic and complex, amenable to changes from time to time. Economic universe, on the other hand, has logic of its own. It has an inherent order through which there is a constant exchange between rational human beings, each seeking to attain maximum gain. Economics, as a science, is an attempt to understand this orderly working of the economy, and an individual in his business of life with a goal to maximizing his gain choosing among his innumerable wants with the limited resources he has at his disposal. Most economic thinkers agree with Alfred Marshall, a leading 19th-century English economist, that economics is “a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment, and with the use of the material requisites of wellbeing” (Marshall, 1890). English economist Lionel Robbins, in the 20th century defines Economics as “the science which studies human behavior as a relationship between (given) ends and scarce means which have alternative uses.” (Robbins, 1945)

As the structure of economies change over time, the science of economics also changes as the tools and analytical methods to study the economic phenomena, its working, problems and solutions keep changing. That is the reason, Economics as a science and discipline has always been influenced by the prevailing social structure, system of governance, institutional structures, ethics and norms. For example Kautilya’s “Arthashastra” is based on the then religious, spiritual and social systems, customs and standards. The individualism of the classical economist’s is essentially a product of the industrial revolution.

The systematic study of economics is of recent origin, but economic analysis has always been prevalent across the world in one form or the other. The science of Economics is as old as human life. The initial attempts to study economics as a subject as part of the education system were first made in Europe at the end of the 17th and the beginning of 18th century (Paul, 1999). The effective birth of Economics as a separate discipline may be traced to the year 1776 (Paul, 1999), when the Scottish philosopher Adam Smith, now known as the “Father of Economics”, published An Inquiry into the Nature and Causes of the Wealth of Nations. The Wealth of Nations, as its title suggests, is a book about economic development and the policies that can either promote or hinder it. In its practical aspects the book is an attack on the protectionist doctrines of the mercantilists and a brief for the merits of free trade. The study of economics in India can be traced back as early as 4th B.C when Kautilya came out with his Arthashastra which provides an authoritative account of the political and economic thought that prevailed in ancient India (Paul, 1999).

Historically, Indian economic thought can be divided in to four periods:

1.      Ancient Economic Thought

Ancient Indian scriptures like the Vedas (Rig, Sama, Yajur, Aharva), Upanishads, Brahmanas, epics, Smrities (particularly those of Manu, Yajnavalkya, Shukra, Vidur, Kamandok and Narad) give an account of the ancient economic philosophies. While Arthashastra and Nitishastra deal with production and exchange, Dharmashastra lays down the rules to be followed in consumption and distribution.

Varta and Arthashastra were the set of guidelines as far as material life was concerned. Varta has been defined as a branch dealing with agriculture, commerce, cattle breeding, money lending and artisanship. Arthashastra covered a much wider field with its insights on jurisprudence, politics and economics and life as a whole. Consumption was based on the principle of Kama, Artha, and Dharma ( aesthetic, economic and religious aspects of worldly life) as separated from Moksha ( or the subject related to non-worldly life).

The ancient economic thought recognized the four factors of production, land, labour, capital and organization. Land was regarded as the source of all wealth, with many kings laying down their lives for it.

2.      Medieval Economic Thought

Medieval economic thought was basically shaped by the rulers during that time. Rulers like Ala-ud-din Khilji, Mohammad Tughlaq and Firozshah Tughlaq introduced economic reorganization and improvements during 8th century to 15th century after which Sher Shah Suri and Akbar brought in various transformations.

Alauddin Khilji deliberately controlled the markets in order to keep the  basic necessities of life at a cheaper rate. This was done with an n intention to maintain a large army for his empire and to prevent rebellion on account of dwindling treasury. Mohammad Tughlaq brought in a new system of token coins, which failed as its monopoly could not be maintained. Firozshah Tughlaq realized the role of the state in production and employment way back in and engaged in a large number of public works in the form of construction of canals, public buildings etc. He reformed the taxation system on the basis of the laws of Quran by introducing four types of taxes ( Khiraj, Zakat, Jizya and Khams). Sher Shah Suri graded and fixed land rent as per its productivity and brought in reforms in the land revenue system.

Far reaching changes were brought in by Akbar in the form of reorganization of the revenue system and promotion of state enterprises. While, the rent of the land was fixed on the basis of last ten year’s average price of land, peasants were brought directly under the state by abolishing the power of jagirs.

3.      Nineteenth Century Economic Thought

The foundations of modern Indian Economics were laid in the early British period by the leading thinkers of that time, namely Dadabhai Naoroji, R.C. Dutt and Gokhale. The economic philosophy was built as a reaction to the misgivings of the British Empire and to bring in systemic changes to eradicate of widespread poverty prevalent that time.

 Their prescription was to bring in a welfare state which would work for the interests of the general public at large. They wanted the heavy tax burden on the Indians to be reduced and the budget surplus to be spent for the betterment of people rather than on military expenses. They advocated the permanent fixation of land tax and the representation of tax payers in the body which controlled the government expenditure.

4.      Twentieth Century Economic Thought

During this time the economic philosophy verged on the practical problems faced by the country rather than on abstract concepts. The prominent thinkers of the time like C. N. Vakil, D. R. Gadgil, Gyan Chand, V. K. R.V. Rao, and R. Balakrishna favored planned economic development by the state and that Laissez Faire is not suitable for India. The balanced utilization of resources suggested the development of agriculture along with all kinds of large scale, small and medium enterprises.

Economics as a subject in India was first advocated by Dadabhai Naoroji but it was Mahadev Govind Ranade who first gave shape to Indian Economics and actually succeeded in establishing it as a separate subject. He is hailed as the “Father of Indian Economics”

B.R. Ambedkar favored radical ideas even in those times by supporting free banking (against monopoly of printing legal tender), gold standard, decentralized planning, individual liberty, private property rights etc. Eminent economists like Rajaji and B. R. Shenoy also advocated economic freedom as against the principally socialist structure prevailing at that time. Unfortunately a lot of those pertinent economic thought by eminent economists like V S Srinivasa Sastri, C. Rajagopalachari, B R Shenoy, N A Palkhivala, Bankimchandra Chattopadhyay, Minoo Masani were marginalized and don’t find mention in the history of economic thought.

Economics as a Discipline of Study in Universities in India:

Economics is essentially a science which deals with the optimum utilization of resources given the fact that human wants are unlimited and there are limited resources with which to satisfy them. It is the science of choice, be it in the household sector, industrial, agricultural, services or the government sector. Economics has broadly two branches: The Microeconomics and Macroeconomics.

Microeconomics deals with the individual units of the economy and its behavior like the individual household, firm, buyer, seller, producer or consumer. Macroeconomics studies the economy as a whole in the form of various sectors, industries its levels of employment, income, monetary policy, fiscal policy and economic growth of the economy as a whole.

Economics is a diverse subject as it deals with human behavior with respect to material pursuits, in his ordinary business of life, which in essence cannot be confined to any one-dimensional thought process. It has its linkages to society, geography, public policy, commerce, management, finance, mathematics and statistics. That is the reason why economics is offered both as a Science and Arts subject in universities at the graduation level. Economics degrees are available as Bachelor of Arts (B.A) and Bachelor of Science (B.Sc) course. As part of the B.Sc course, the emphasis is on statistical methods, quantitative and mathematical application in economic theories and concepts. Economics as part of a B.A course, the emphasis is more on the qualitative aspects of economics theories, concepts and models. Economics is often offered as part of a joint or combined honors degree, paired with subjects including history, sociology, psychology, mathematics, statistics, modern languages and politics. It is also part of diverse courses in law, management, commerce, engineering and computer science. It would be worthwhile to note the history of Economics as a separate discipline in some of the important Universities in the country.

History of the discipline of Economics in some of the Indian Universities:

Punjab University: The University was set up as early as 1882. After the partition of the country, the teaching of Economics in this University was centered in Government College, Hoshiarpur under the guidance of Professor K.K. Dewett. His hands were strengthened by the appointment of Professor S.B. Rangnekar in 1951. The location of the department was shifted to the Chandigarh Campus in 1958 and it continues to be a leading center of teaching, research and learning of economics in the region.
The department has the honor of having produced many well-known economists like Dr. Manmohan Singh (Prime Minister of India), Dr. G.K. Chadha (member Prime Minister's Economic Advisory Council and former Vice-Chancellor, Jawaharlal Nehru University, New Delhi) and Dr. B.S. Minhas Research activity in the department can be broadly classified into four groups viz. Industrial Economics, Money, Trade and Finance, Agricultural Economics and Development Studies. (

University of Madras: The University of Madras, Department of Economics, began in 1912, is one of the earliest one to be set up. It was commissioned with a special and non-recurring grant sanctioned by the Government of India to the University of Madras. It was later bifurcated and Department of Econometrics was established in July 1980 ( to focus exclusively on the quantitative aspects of the discipline. Since its inception, the department has focused on teaching and research in quantitative economics emphasizing theoretical, methodological and conceptual issues in economics along with applications to socially relevant economic issues and policies.

University of Calcutta : It was established in the year 1914.. It offers courses in MA, MPhil and PhD. Major thrust areas in which both theoretical and empirical research activities are being actively pursued are Urban Economics, Environmental Economics, Economics of the Informal Sector, Trade and Development, Trade and Environment, Agricultural Economics, Gender Studies, Economics of Child Labor, Political Economy, Economics of Education and Development Management. (

Delhi University: The Delhi School of Economics is one of India’s premier and most sought after institutes of higher learning in the discipline of Economics. “The school was launched in 1949 by V.K.R.V. Rao, with the support of Prime Minister Jawaharlal Nehru. It grew out of a vision that a newly independent nation, which aspired to social and economic progress, needed a vibrant centre for advanced studies in the social sciences. The department of economics, along with its sister departments of geography and sociology, has produced many of the country’s leading academics, educators, administrators, policy makers, corporate leaders and journalists. Nobel Laureate Amartya Sen, Prime Minister Manmohan Singh, and the late Sukhamoy Chakravarty, one of the architects of India’s Five Year Plans, have all taught here.”  (

GujaratUniversity: It was established in the year 1954 . Currently the department is involved in post-graduate teaching leading to M.A. and M.Phil degrees. “Special areas of specialization include Mathematical Economics and Econometrics, Quantitative Economics, Industrial Economics, Agricultural Economics and Financial Institutions and Markets at M.A. level. At M.Phil level students are offered specialization in Public Finance and Mathematical Economics and Econometrics.”  (

Bangalore University : “The department was established in 1962 in Central College as a postgraduate department of the University of Mysore. In July 1964, with the establishment of Bangalore University, the then Centre of Economics came under the jurisdiction of the new University as the Department of Economics. A three years B.A Economics (Hons.) Course was introduced in 1967 with the aid from Danforth Foundation, USA. The course was modelled on the American pattern, headed by Dr. Quincy Adams. The M.A, Economics course was introduced in 1969 in the Central College Campus. In 1976, the Department was shifted to the Manasa Bhavan in the Jnanabharathi Campus of the University.” (


Alfred Marshall in his eighth edition of “Principles of Economics” commented that “economic conditions are constantly changing, and each generation looks at its own problems in its own way” (Marshall, 1890). “Economics arose everywhere. But everywhere it was distinctive. Scientific and practical knowledge about the economy was conceptualized and institutionalized in different ways in different places, and for identifiable reasons. (

 The education in economics as a whole in the world as well as India has also changed its paradigms in tune with the current state of affairs, trends and developments in the world. The following is a list of top 10 universities in the world in the discipline of Economics: (

1. Harvard University, United States

2. Massachusetts Institute of Technology (MIT), United States

3. London School of Economics and Political Science (LSE), United Kingdom

4. University of Chicago, United States

5. University of California, Berkeley (UCB), United States

6. Stanford University, United States

7. Princeton University, United States

8. Yale University, United States

9. University of Cambridge, United Kingdom

10.Columbia University, United States

 References: (n.d.). Retrieved April 12, 2014, from (n.d.). Retrieved April 13, 2014, from (2014). Retrieved April 12, 2014, from (n.d.). Retrieved April 12, 2014, from (n.d.). Retrieved April 12, 2014, from (2014, April 12). Retrieved 04 12, 2014, from (n.d.). Retrieved April 12, 2014, from (2014, April). Retrieved April 12-04-2014, 2014, from (n.d.). Retrieved April 12, 2014, from

Marshall, A. (1890). Principles of Economics. Macmillan and Co. Limited.

R.R.Paul. (1999). History of Economic Thought. Kalyani Publishers.

Robbins, L. (1945). An Essay on the Nature & Significance of Economic Science. Macmillan and Co. Limited.


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