The following points highlight the top four economic ideas of Mahadev Govind Ranade. The economic ideas are: 1. Method and Scope of Political Economy 2. Economic Education 3. Economic Development 4. India’s Poverty.
Economic Idea # 1. Method and Scope of Political Economy:
After a careful study of the economic systems of various European countries, Ranade believed that inductive or historical method was the best. In his words, “The method to be followed is not the deductive but the historical method which takes into account the past in its forecast of the future; relativity and not absoluteness, characterizes the conclusion of the economic science”.
Again, while the classical economists believed in the universal application of economic laws, Ranade considered economic laws were only relative. In other words, he believed in the doctrine of relativity. Ranade criticised Adam Smith, David Ricardo, Malthus, James Mill and Meculloch for their absolutism and assumptions.
He said that their ideas were applicable only to a static society. He held the view that in India, institutions like family and caste were more powerful than the individual in the determination of his economic position. Wealth was not the only thing to be aimed at.
He said that the traditional assumptions of economic theory were true only for England. Being influenced by the ideas of Adam Muller and List, Ranade emphasised the many sided development of productive powers. Further he suggested that the study of theory and practice should go side by side. “Theory” says Ranade, “is only relation to proximate causes”.
Economic Idea # 2. Economic Education:
Ranade emphasised the importance of economic education in promoting the wealth of a nation. He said, “The nation’s economic education is of far more importance than the present gain of its individual members, as represented by the quantity of wealth measured by its value in exchanges. In a sound and normal condition all the three departments of national activity must be fully developed. Commerce and manufactures are, if possible, more vital in their bearing on education, on the intelligence and skill and enterprise of the nation than agriculture.”
Economic Idea # 3. Economic Development:
Ranade held that economic development was a complex phenomenon and it had many interrelated causes. It was connected with economic institutions. Thus economic development of India depended on economic, social and political institutions. It was the duty of the state, to direct and channelize the activities of individuals and institutions, towards a well determined goal. In India, since the private initiative was shy, the state should undertake measures for the industrial development of the country.
“The State”, said Ranade,” is now more and more recognised as the national organ for taking care of national needs in all matters in which individual and cooperative efforts are most likely to be so effective and economical as national effort. To relegate them to the simple duty of maintaining peace and order is really to deprive the community of many of the advantages of the social union”.
Economic Idea # 4. India’s Poverty:
Dutt and Naoroji believed that poverty of India was the result of the British rule. Ranade believed that mass poverty had been there in India even before the British rule. Ranade thought that India inherited poverty from the past generations, which had increased on account of foreign rule. According to Ranade the main causes for poverty were the predominance of agriculture, backward state of industries, lack of credit facilities and defective land policy.
Predominance of agriculture was due to the economic policy of the government, which encouraged the production of raw materials to be transported to England. Secondly, industries were in a backward state due to their inability to face severe foreign competition. Thirdly, the credit system was highly unorganised and banking facilities were inadequate. Lastly, the land policy was also defective because the assessment of revenue was highly arbitrary.
In order to eradicate poverty and to make India economically prosperous, Ranade made certain suggestions. He wanted a balanced and well planned development of agriculture, industry and commerce. He thought that without reducing the number dependent on agriculture, there could not be agricultural development. He advocated state action in order to promote large scale farming. Thus Ranade opposed the laissez-faire policy of the state and believed that the state should play an active role in removing poverty and promoting the welfare of the state.
In order to absorb the surplus agricultural population, Ranade suggested the establishment of agro-based industries by the state. Further he advocated changes in land policy to serve the interests of the cultivators. He suggested a liberal land policy and a permanent Ryotwari system. Fifty percent of the profit from land should go to the cultivators and the farmers might be allowed to pay their tax in kind, if i t was convenient for them. Further he advocated re-organisation of credit system and formation of committees of capitalists to finance agriculture.
Ranade opposed the policy of free trade because it was harmful to the local industries. So he advocated a policy of protection to the Indian industries. Not only that, he wanted the government to follow a positive policy for promotion of industrial development of India. The indigenous resources should be utilised to produce commodities in state factories. For the proper utilisation of resources of the various regions, Ranade suggested the redistribution of population. He advocated a balanced redistribution of population by sending people from thickly populated areas to sparsely populated areas.
Ranade occupies a significant place in the history of economic thought. In order to make economic studies more realistic and meaningful Ranade suggested the study of economic problems in the national context. He was really a national economist. He has been characterised by Sir J.C. Coyajee as an economic relativist and by Prof. D.G. Karve as the first economist who suggested planning. Many of Ranade’s suggestions were put into practice.
His suggestion for re-organisation of credit system led to the establishment of land mortgage banks. His advocacy of many-sided economic development and state action helped to a great extent in the eradication of poverty.
Besides being an eminent economist and able historian, he was a leader of thought and great patriot. We may conclude in the words of Prof. Karve, that Ranade was, “a great man, a fervent patriot, a religious reformer, a leader of thought, a guide of men, an able historian, an eminent economist and the prophet of liberal India.”