Did you know that the Reserve Bank of India (RBI) was conceptualized and established on the basis of guidelines or directive principles presented before the Hilton Young Commission by Dr. Ambedkar? The Royal Commission on Indian Currency and Finance, also known as the Hilton Young Commission, strongly recommended Dr. Ambedkar's book, "The Problem of the Rupee - Its Origin and Its Solution," during their visit to India. This book laid the foundation for the establishment of the RBI, which came into existence on 1 April 1935 under the Reserve Bank of India Act 1934.
Before independence, in 1926, Babasaheb submitted the draft of bank establishment before the Hilton Young Commission. It is regrettable that despite his contributions to economics research, Dr. Ambedkar's accomplishments in the field are often undermined. In fact, Nobel Laureate Amartya Sen called Ambedkar "Father of My Economics."
Dr. Ambedkar's expertise in economics is notable. It was his favorite subject, and he conducted research in the field from the best universities in the world. Despite his accomplishments, Dr. Ambedkar is often presented only as the messiah of Dalits and backward groups and the architect of the Indian Constitution.
Initially, the Reserve Bank of India had its central office in Kolkata and later shifted to Mumbai in 1937. It was a private entity before becoming a Public Sector Unit in 1949. During the Hilton Young Commission's visit, each member of the commission had a copy of Dr. Ambedkar's book, highlighting the significant contribution he made in the establishment of RBI.
Dr. Ambedkar's contribution to economics is often overlooked because of his social and political work after returning to India in 1923. However, Dr. Ambedkar's views on economic upliftment are a significant aspect of his social and political cause. He believed that social and political participation is not possible without economic upliftment. Dr. Ambedkar addressed issues related to Indian currency, inflation and exchange rates, India's national dividend, development of provincial finance in British India, ancient Indian commerce, and the administration and finance of the East India Company. He not only researched on the topics but also provided practical solutions to the problems.
Dr. Ambedkar's understanding and contribution to the subject of economics were appreciated by eminent economists worldwide. He was able to secure a PhD in economics in 1927 and wrote his thesis on 'Ancient Indian Commerce,' which provided insight into his understanding of ancient Indian commerce. In his thesis, he delved into the problems that afflicted the ancient Indian trade system and presented their possible solutions.
Dr. Ambedkar's approach towards economic problems was practical. His belief was that the main reason for India's backwardness has been the delayed reforms in the land system, and democratic socialism is the solution to increase economic efficiency and productivity. He opposed laissez-faire and scientific socialism and believed that the transformation of the rural economy is possible through his approach to economic problems.
Dr. Ambedkar strongly advocated for the abolition of the capitalist system, which created economic and social inequality. His views on economics were influenced by his degree in DSc from the London School of Economics in 1923. His thesis focused on the devaluation of the rupee, which was the most critical economic problem of the time. Dr. Ambedkar also opined that the report of the Finance Commission should be presented at intervals of 5 years.
Dr. Ambedkar played a significant role in the establishment of the Reserve Bank of India. He prepared the blueprint for the establishment of the Reserve Bank in India. The RBI recognized his contribution, and on the occasion of 81 years of its establishment, the central bank issued coins in his name.
Baba Saheb advocated for the establishment of large industries while simultaneously recognizing that agriculture is the backbone of society. He emphasized that agriculture should not be ignored as it provides food to the growing population of the country, and industries rely on agriculture for raw materials.
Dr. Ambedkar believed that the foundation of modern India would be laid on agriculture. He advocated for revolutionary steps for the reorganization of the agricultural sector and the nationalization of agricultural land. Dr. Ambedkar recommended that the state should plan the economic life of the people in a way that achieved the highest point of productivity and provided for the equal distribution of wealth, with no demand for private industry.
Dr. Ambedkar proposed state ownership in a planned manner in the fields of agriculture and industry. He recommended collective farming in agriculture and state socialism in the industrial sector, with the state responsible for providing necessary capital for agriculture and industry. Dr. Ambedkar's research holds relevance today as it provides possible solutions to the problems afflicting the nation, such as poverty, unemployment, inflation, backwardness, inequality, and the devaluation of the Indian rupee in relation to foreign currency.
The Reserve Bank of India (RBI) plays a significant role in the financial management of the Central and State Governments in India. Section 20 of the Reserve Bank of India Act empowers the RBI to handle the receipts and payments of the Central Government, including exchange, remittances, and other banking operations, alongside the management of the public debt of the Union. Additionally, Section 21 of the Act allows the RBI to conduct government business in India.
Section 21A of the Reserve Bank of India Act empowers the RBI to transact with the State Governments. The RBI has entered into agreements with every state in India, except Sikkim. The Central Accounts Section of the RBI in Nagpur handles the primary accounts of the Central and State Governments. The RBI has a well-functioning system for revenue collection and payment management, and government transactions occur through the Public Accounts Department of the RBI and branch networks of agency banks appointed under Section 45 of the RBI Act.
Presently, all Public Sector Banks and three Private Sector Banks, namely ICICI Bank Ltd., HDFC Bank Ltd., and Axis Bank Ltd., act as agents of the Reserve Bank of India. Only authorized branches of agency banks can undertake government transactions. This system allows for a widespread network of branches across the country, efficiently handling government transactions.
Story Translated by Pratikshit Singh
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