In an earlier post on CD Deshmukh, I drew on his life and career in the context of his abiding interest in botany and of horticulture (see here). Here, I describe in greater detail, his professional career, almost devoid of personal references. A much shorter version, about one fifth in length, appeared in an online encyclopaedia of Indian economists (see here).
Contents
Introduction
Milton Friedman’s first and most extended visit to India was at the invitation of the Government of India. He was invited by the Government of India to advise C.D. Deshmukh, the Finance Minister. Friedman described Deshmukh as a “fairly typical member” of the Indian Civil Service (ICS). He added, “very intelligent and impressive… quiet and an excellent listener, but with a keen mind and a not unsympathetic approach.” Friedman described the ICS thus:
“…the British developed the Indian Civil Service, consisting of the ablest Indians they could attract, whom they sent to Britain to be trained. A highly elite group, almost all graduates of Oxford or Cambridge, they were few but were given great authority and independence. They ruled the vast and populous country. I have never met a more able or dedicated group of civil servants than the members of the ICS with whom I came in contact.”
Chintaman Dwarkanath Deshmukh (1896-1983) is best known today as the third Governor (1943-1949) at the Reserve Bank of India and as the third Finance Minister (1950-1956) of independent India. Two stints, as a civil servant and as an institution builder, preceded and followed the above two. While Deshmukh was not an economist in the literal sense. But, his contributions as an economic policy maker and administrator, and in promoting economic research at the Reserve Bank of India, the Government of India, and elsewhere have been immense.
Early days
Born on 14 January 1896 in Nata, a village in Kolaba district (renamed Raigad District in 1981), to a small-town lawyer, Chintaman was the eldest of nine brothers and sisters. Born in a Chandraseniya Kayastha Prabhu family, his prowess in learning was evident from an early age, especially in Sanskrit. In the Bombay University’s matriculation examination 1912, he stood first. He also won the first of the two coveted Jagannath Shankarsett scholarships for Sanskrit. He also won two other scholarships. Studying at the Elphinstone College, he stood first in the Previous and Intermediate examinations of the Bombay University.
In 1915, he won a scholarship to study in the UK and to write the Civil Services examination. At the Jesus College, Cambridge University, he passed the Natural Science Tripos in Botany, Chemistry and Geology in 1917. He obtained first class and won the Frank Smart prize in Botany. Deshmukh also studied law and passed the final bar examination in 1919. But was called to the Bar only in 1963/65?
Apart from Marathi, his mother tongue, Sanskrit and English, Deshmukh also became proficient in French and German.
Civil servant
Deshmukh wrote the Civil Service examination in 1918 in London. He stood first and joined the Indian Civil Service on 3 November 1919. Before returning to India, Deshmukh married Rosina, a British national, with whom he had a daughter, Primrose, born in 1922.
Central Provinces & Berar
After reporting to India on 20 April 1920, Deshmukh was posted to the Central Provinces and Berar. The earlier part of his career was not particularly eventful. His career followed the usual trajectory of moving up from Assistant Commissioner to Sub-Divisional Magistrate, Under Secretary, and Deputy Commissioner. In between, he was also Settlement Officer for Raipur, which we will see later. Probably because of his contribution there, he became Revenue Secretary and Finance Secretary (1934-39). In the last two posts, he also held charge of Commerce and Industry, and Public Works.
Settlement Officer
Deshmukh’s chance to make a mark came rather serendipitously. In 1926, Arthur Nelson (ICS, 1899), then Chief Secretary, gave him two options. One was a recommendation to become Under Secretary in the Commerce and Industry Department in Delhi. The other was to become the Settlement Officer for Raipur District. Deshmukh chose the latter as it came with a special allowance of Rs 150 per month. It helped him repay his debts incurred in his and his brothers’ education.
As the Settlement Officer, Deshmukh innovated by classifying soils by physical composition and position for rice lands. Using a method tried by Sir John Hubback in Bihar and Orissa, he introduced random sampling in four successive seasons. Accordingly, he arrived at the average yield for each soil class. Ronald Fisher, the eminent statistician, noticed this innovation. More than two decades later, PC Mahalanobis, at the Indian Statistical Institute, would scale it up as national sample surveys.
Deshmukh also experimentally consolidated land holdings in a village near Raipur. The then Governor of CP & Berar, Sir Montagu Butler, inspected the site and commended the experiment. Following the experiment’s success, a Consolidation of Holdings Act for the State was placed on the Statute Book.
Round Table
Deshmukh’s life took a fortuitous turn in the end of 1931. He was holidaying in England with family, when the government advised him to assist the Second Round Table Conference. Deshmukh readily agreed. The Conference, held in London from September to December 1931, extended his stay in England. As one of the Joint Secretaries in the Secretariat, Deshmukh assisted the Federal Structure Committee. More importantly, the long Conference introduced him to Indian leaders of all communities and political affiliations from across the country. That included the present day Myanmar, Pakistan, and Bangladesh.
Niemeyer Enquiry
After the Government of India Act 1935, the Indian Finance Enquiry examined financial arrangements between the Central and Provincial governments. Otto Niemeyer, British banker and civil servant, once tipped to succeed Norman at the Bank of England, headed it. The Central Provinces submitted a memorandum to the Enquiry, which Deshmukh as Finance Secretary drafted. Niemeyer and the Finance Department in Delhi appreciated the memorandum. It probably played a role in Deshmukh’s inclusion when a Finance and Commerce Pool of Civil Service Officers was constituted.
In 1937, Deshmukh figured in the new year honours list with a CIE. Sir Hyde Gowan, the Governor General, attributed it mainly to Deshmukh’s excellent contribution to the Niemeyer Enquiry. The Government of India made tentative enquiries whether Deshmukh could be deputed to it. But, their unofficial representatives were told, “Our C.D. is not on sale.”
Planning essentials
As Secretary for Revenue and Finance, Deshmukh was a Member of the Legislative Council from 1932 till 1937. Speaking in the Council, in 1935, Deshmukh, as Finance Secretary, laied out what he considered were the essentials of planning. He we speaking on a private member’s resolution to draw up a five-year plan for economic and industrial development. He said:
The essentials of all planning are, first, intensive introspection … taking stock of your position comprehensively; second, economic reorganisation including a certain amount of dragooning of the populace; third, drawing up a plan and lastly, directing effort towards certain pre-determined ends, as also making up arrears of development in the past…as regards introspection, you cannot start planning unless you have a very intensive survey of rural and urban conditions. That (was why) …the Government of India when they called two experts from England to come and examine the basis of Indian statistics and the possibility of conducting a census of economic production. They brought out a report which shows that the cost of a survey would be somewhere near Rs 30 lakh for the whole of India. That probably is the reason, sir, why we’re not hearing anything more about the carrying into effect of their plan.
Prerequisites
Deshmukh also went on to detail what he considered were the prerequisites of planning.
Planned economy in a nation implies certain pre-requisites… complete self-sufficiency of the nation or the province and freedom from economic dependence in any form on any foreign country; complete financial autonomy, for instance, the power to manage currency; then unquestioned state interference with any aspect of economic activity; lastly big money to implement plans… most of these conditions are lacking in a small unit like the Central Provinces. many things … are altogether beyond our control… we cannot affect the course of the essential factors which have brought about the present depression, we cannot manipulate currency, we cannot establish an equilibrium within production and consumption, we cannot restrict the acreage of any farm produce, we cannot impose tariffs, nor can we protect or give shelter to industries, and so on.
Deshmukh was echoing, in a roundabout way, what Sir M Visveswaraya wrote the previous year. Sir MV wrote: “A responsible government and a suitable economic organization are both absolutely necessary to replace the present sterile economic order.” (M. Visveswaraya, Planned Economy for India, 1934)
Corruption
Throughout Deshmukh’s career, he red-flagged corruption, big or small. The Public Works Department was under him. On checking details of maintenance expenditure, he found a substantial amount for repairing a road laid in the previous year. On his orders, the Superintending Engineer conducted an inspection. The report revealed that there were only three inches of boulder as against nine inches required. Moreover, there was only one inch of road metal as against requirement of three inches. The Assistant Engineer responsible had retired. Deshmukh lamented that his efforts to stop or reduce his pension was not successful.
In another instance, Ravi Shankar Shukla, the Chief Minister, advised a Superintending Engineer to upgrade a certain stretch of road. The Engineer was at a loss as the instruction was oral. Moreover, it was not an approved project and many other works had to be rushed through. As it was the year end, the amount sanctioned could lapse. He approached Deshmukh who advised him to ignore the oral orders. This apparently displeased the Chief Minister.
In another case, the Accountant General objected to the Governor’s ADC drawing travelling allowance. He had accompanied Lady Gowan, wife of Sir Hyde Gowan, the Governor, to Bombay to see her off. Deshmukh upheld the objection. As Deshmukh stated, “The Governor fretted and fumed for a day or two, but was too seasoned an administrator himself not to grasp the point, and the incident left no bitterness behind.”
Other contributions
Among his other contributions, Deshmukh opposed a blanket prohibition. He argued that liquor from the mahua tree was almost part of the daily diet of the region’s tribals. P. B. Gole, the Revenue Minister under the N.B. Khare government, accepted his view.
On Deshmukh’s advice, the provincial government introduced an excise duty on petrol. This led to a dispute with the Government of India, which countermanded the order. The provincial government appealed to the recently established Federal Court, where it was the first big case of that nature. The Madras Government, represented by Sir Alladi Krishnaswamy Aiyer, joined the appeal. They won the appeal, paving the way for bringing in substantial revenue for years to come.
Deshmukh also made a case for reflating the economy. This was along the lines of the New Deal under Franklin Roosevelt in the USA to counter the depression. It followed Keynesian theory, still fresh in the academic world.
Farewell
In May 1939, Deshmukh became Joint Secretary to the Government of India in the Department of Education, Health and Lands. Deshmukh had his run-ins with certain political leaders. His tough stand on corruption also did not make him popular. Nevertheless, he left the province “with the goodwill and good wishes of the Congress Government.”
Delhi stopover
Deshmukh’s stint in Delhi was brief, hardly two months. He was Joint Secretary to the Government of India in the Department of Education, Health and Lands. He used to meet Sir Jeremy Raisman, the Finance Member, on his way to the office. Raisman told him one day that the government was sending him to the Reserve Bank of India immediately. This was in consultation with Sir James Taylor, the Reserve Bank’s Governor. He would become the Government Director on the Bank’s Central Board. Later on, he would become the Secretary to the Board.
Central banker
Overview
In 1939, the Reserve Bank of India had only one Deputy Governor. The vacancy caused by the elevation of Sir James Taylor as Governor had not been filled. This was a matter of concern to the Government of India and the India Office in London. To quote Deshmukh from his VG Kale Memorial Lecture:
India Office raised the question of management of the Bank should Taylor fall ill or take leave. The reaction from India was evasive, adducing the difficulty of finding the right type of European to import. As a short-term solution it was thought best to maintain a liaison officer to keep the Government of India closely in touch with developments by being Government’s representative on the Board and also attending committee meetings. Against the contingency of Taylor becoming suddenly and permanently incapacitated, the Government of India thought a senior officer of the Imperial Bank would be most suitable.
The immediate short-term solution was the appointment of CD Deshmukh in July 1939 as a Liaison Officer. This was a temporary arrangement till September when he became Secretary to the Central Board. He replaced P.S. Beale, who returned to England soon after the War broke out. As liaison officer, Deshmukh was the government’s nominee to the Bank’s Central Board.
Deshmukh was Secretary until November 1941, when he was made Deputy Governor from December. In compliance with one of the appointment conditions, he resigned from the ICS. He remained Deputy Governor until August 1943, when he became the first Indian Governor of the Bank. During the six preceding months, Deshmukh chaired the Central Board meetings after Taylor’s death in February 1943. Deshmukh remained Governor till 30 June 1949.
Bretton Woods
In July 1944, Deshmukh joined the Indian Delegation to the World Monetary Conference. Better known as the Bretton Woods Conference, it led to the establishment of the IMF and the World Bank. At Deshmukh’s suggestion, the Indian delegation threated to withdraw from the negotiations. Thanks to this, India received sufficient allocation of quota to bring it among the top five countries.
After their establishment, Deshmukh was a Member of the Board of Governors of both IMF and IBRD from 1946 to 1956. He also chaired their Joint Annual Meeting held in Paris in 1950.
Research Department
Anand Chandavarkar wrote that Deshmukh overcame severe internal and external opposition in creating a research department at the Bank. Deshmukh considered it one of the “outstanding developments” in the Bank. The Bank appointed J.V. Joshi as Economic Adviser. A favourite student of John Keynes at King’s College, Cambridge, he worked earlier with John Matthai in Commercial Intelligence and Statistics. Among those recruited was Dr. B. K. Madan, who became Deputy Governor long after Joshi did. Deshmukh listed a “galaxy of talent” he recruited, including Dr. J.J. Anjaria, Dr. K.N. Raj, Dr. Saokar, Dr. P.S. Narayan Prasad, Shri S.L.N. Sinha, Shri Chari and Dr. N.S.R. Sastri. The Bank sent its senior officers to the US, Canada and UK to study compilation of international accounts. It also deputed officers to international conferences to keep abreast of the latest developments in other countries.
Banking regulation
Even before Deshmukh arrived at the Bank in 1939, banking regulation was a matter of concern. The Travancore National Quilon Bank went into liquidation only the year before. A draft legislation prepared by Sir James Taylor aimed at regulating banking companies. Eventually, it became an Act only after the war in 1949. Before this, ordinances were passed for the inspection of banks and the restriction of branches (later an Act), and a separate Department of Banking Operations (the present Department of Regulation) was hived off from the Agricultural Credit Department in 1945. More specialists were recruited to this new department.
Forex challenges
Exchange control
Deshmukh considered exchange control as the area which saw the maximum expansion of functions and responsibilities during his term as Governor. The challenges in foreign exchange were probably as great as any other. At the beginning of the Second World War, in 1939, the UK reintroduced exchange control. As the Bank of England summed up, “The objective of this control (was) to conserve foreign exchange and directly to improve the UK balance of payments and the reserves.” In terms of its influence, “it affected the foreign assets of people living in (the UK); the sterling assets of those living outside the sterling area; and all monetary transactions between the United Kingdom and countries outside the sterling area.”
Given India’s situation and interests, Governor Taylor was not in favour of a comprehensive exchange control. He felt that it was both difficult and undesirable leading to fears of the Bank’s inability to maintain the value of the rupee which would in turn increase demand for remittance and even a flight to gold. The Bank of England disagreed with Governor Montagu Norman considering it more prudent to be stringent at the outset and relax when required.
Reflecting the UK government initiative, all sterling area countries introduced exchange control. The Government of India followed suit with the Defence of India Act, 1939. The rules framed thereunder provided for, among other things, restrictions on export of currency, coin and gold, possession of foreign exchange, making remittances, and residents were obligated to surrender foreign exchange. The Reserve Bank was also empowered to authorise individuals and banks for these purpose and also grant exemptions wherever required. Indian banks were also introduced to foreign exchange business which was earlier the preserve of foreign-owned exchange banks against stiff opposition from vested interests.
Controller
The Bank also created a new Exchange Control Department with Henry Douglas Cayley from the National Bank of India as the Deputy Controller and the Governor as the ex officio Controller. The Governor remained the ex officio controller until 1962 when the officer in charge of the department was made the controller. Cayley continued till 1948, when he rejoined the National Bank and after its merger with the Grindlays Bank a decade later, to become the National and Grindlays Bank Ltd., became its General Manager and finally director in London.
Cayley was born in India. I presume he was a grandson of Dr Henry Cayley (1834-1904), through one of his sons who was also a doctor, in Bombay. Dr Henry belonged to the Indian Medical Service of 1857 batch, standing first in what was probably the first batch after three provincial medical services with a history going back to 1612 was merged. He served in different places including Simla, Gorakhpur, and Ladakh. Continuing and expanding his medical education, he became an ophthalmologist, heading the department at the Calcutta Medical College. He was Honorary Surgeon to the King when he died in 1904.
Empire Dollar Pool
During the war
The UK also introduced in the same year a system of dollar pooling in the sterling area countries that included itself and its dependencies, including India. In this arrangement, the sterling area member countries were all required to introduce exchange control, and their dollar earnings were to be pooled, from which the Bank of England would meet the requirements of member countries.
Towards the war’s end, in March 1945, India’s net contribution to the dollar pool was around USD 300 million. Both the Government and the Reserve Bank of India took initiatives to ensure that India’s contribution was segregated so that it was available for India’s post-war development. It was even suggested that India pull out of the pool and hold its dollars separately.
Post-war challenges
After the war ended later that year, Indian companies sought adequate foreign exchange, particularly dollars, to replenish depleted stocks caused by the war. The Reserve Bank supported this.
Heading the sterling area, the UK had its challenges and priorities and kept a tight control over dollars, an attitude which only strengthened in later years. Therefore, the Reserve Bank of India urged a segregation of India’s contribution to the pool to conserve its dollar earnings to fund its post-war development.
Lend-lease agreement
A lend-lease arrangement with the U.S.A complicated the situation. This arrangement, started by the USA in 1941, marked the end of American neutrality. It provided assistance to countries considered critical to the defence of America with essentials like food, oil, and war materials. As a part of the British Empire, India was also at War and a party to this arrangement. India’s favourable balance with the U.S.A. could drastically come down or become unfavourable if this arrangement was also considered. There were demands that India withdraw from the dollar pool and hold its earnings separately. After Deshmukh succeeded James Taylor as Governor, he attempted to secure India’s interests. Opting out of the dollar pool would have led to a situation where India would be expected to pay in dollars for an adverse balance of payments with countries outside the sterling area.
Reconstruction Fund
Finally, the British Treasury created a Reconstruction Fund to be held by the Reserve Bank in a dollar account with the Bank of England, to which $20 million would be credited annually. This did not satisfy the Indian public opinion and potential US exporters to India. The announcement in February 1944 by the Finance Member explained that the Fund would be apart from and in addition to India’s current dollar requirements, which were met from the Empire Dollar Pool.
Deshmukh’s stand
Deshmukh was anxious that at least some of India’s past contributions to the Pool should be made available to India. He wrote to the government arguing that only such dollars should be retained from India’s earnings by the UK, which is considered reasonable for the war effort. At the Reserve Bank’s AGM held that year in Madras, Deshmukh was to plead for adequate allotment of dollars for India’s essential purchases. As per practice, the speech was sent to the government in advance. The government sent an emissary to persuade Deshmukh to tone down his speech critical of the arrangements. But he refused.
Pakistan’s interests
Partition
Under the partition arrangements, the Reserve Bank of India was to continue to be Pakistan’s currency authority and banker to the government till September 1948. The Bank was also to manage its foreign exchange and public debt till March 1948. In addition to India, Deshmukh also became central bank Governor for Pakistan until the State Bank of Pakistan was created on 1 July 1948 and for Burma (now Myanmar) until the Central Bank of Myanmar was established on 3 April 1948. Under the Indo-Pakistan Payments agreement, entered into on June 30, 1948, i.e., just on the eve of the Bank’s withdrawal from Pakistan, the exchange rates of the two currencies were fixed at par. Any change could be made only after notice and mutual consultation.
After one such consultation, the agreement was extended to June 30, 1950, with some changes. Within a few days of signing the supplementary agreement on 10 September 1949, the rupee, the British pound, and around 28 other currencies were devalued. As Pakistan did not devalue its rupee, the agreement became infructuous.
By early 1948, the sterling area reserves had shrunk substantially, and Indian and Pakistani delegations went to London for a fresh settlement. Deshmukh was part of the Indian delegation headed by RK Shunmugam Chetty, the Finance Minister, and also included Purshottamdas Thakurdas, V.T. Krishnamachari and T.T. Krishnamachari.
Sterling balances
According to Deshmukh, “a fair portion of the sterling balances was transferred to Pakistan and some adjustments were made in settlement of sums due to U.K., but no portion was written off, and a reasonably satisfactory formula was devised for meeting India’s needs for foreign exchange outside the sterling area, there being no artificial ceiling imposed.”
Provisions were also made to release sufficient sterling over the next two years, extent of drawings from reserves of hard currencies, final settlement of the cost of military stores and installations that India took over, fixing UK’s dues under the Defence Expenditure Plan, sterling pensions liability, and other arrangements for continued cooperation between the two governments.
When India became independent, he ensured that India’s quota in the IMF was not reduced from 400 and supported Pakistan’s cause in getting 100. Deshmukh wrote that he “tried to ensure that the Bank discharged its obligations to Pakistan as conscientiously as in the case of India.” There is at least one case where Deshmukh arranged for the practical training of a Muslim officer who had opted for Pakistan because Karachi was his native city, so the new central bank of Pakistan would not be short of such well-trained officers.
Nationalisation
Deshmukh stayed on as Governor until the transfer of the Reserve Bank of India to government ownership was completed. As Deshmukh recalled later, “this major step in nationalisation was completed and put to work without a jolt. The smooth working of the partnership was further assisted and firmly established with the subsequent—maybe fortuitous—appointment of the ex-Governor of the Reserve Bank of India as the Government of India’s Minister of Finance.”
Looking back
In retrospect, Deshmukh felt that under his stewardship, the Reserve Bank made significant progress in several respects, starting with the Department of Research and Statistics, comprehensive proposals for the regulation of banking companies, developing industrial finance, including the establishment of the Industrial Finance Corporation of India, and strengthening the infrastructure for rural credit through a new Agricultural Finance Corporation and other steps. Thus, under Deshmukh’s period, the Bank diversified its functions from basic currency and banking to public debt to a full-fledged development-oriented central bank.
Other important work included preparing for international monetary cooperation, including participation in the Bretton Woods Conference. The Bank also successfully realised the full value of India’s sterling balances and other foreign exchange resources accumulated during the Second World War. A smoother transition was also effected from being a private shareholder’s bank to a fully government-owned institution while at the same time not compromising the Bank’s independent advisory role on economic and financial issues.
A commemorative volume brought out by the India International Centre on the occasion of Deshmukh’s centenary observed as follows: “Perhaps the most significant feature of Deshmukh’s stewardship of the Reserve Bank was his vigilant assertion of its independence, particularly from the Government of India and its Finance Department. The history of the Reserve Bank of India recounts some of these episodes, such as Deshmukh’s firm rejection of the suggestion of the Department that the Bank should hold consultations with the Government on the allocation of its profits. Or his sharp reactions to the comments of the Finance Secretary on the drafts of the Governor’s speech as unacceptable.”
Finance Minister
Appointment
In 1946, Lord Wavell, the Viceroy, first offered Deshmukh a position as a finance member in the interim government pending the transfer of power to an independent India. He politely declined, citing two reasons: one that he was not suited for the rough and tumble of political life and second that he had recent health issues. He suggested the name of John Matthai to his close friends who had the Viceroy’s ear. Matthai was offered the post, and he accepted it.
A second offer came in 1950 when Matthai, having become the second Minister, resigned following differences over the constitution of the Planning Commission. But before that, in 1949, he was appointed Financial Ambassador of India in Europe and America, in what he called a peripatetic posting. During this stint, among other things, he was able to successfully negotiate a wheat loan.
In April 1950, Deshmukh helped constitute a new Planning Commission. The following month, after Matthai’s resignation, he was asked to become the Finance Minister. In the first General Elections, Deshmukh would be elected a member of parliament from his native Kolaba constituency.
Planning
Planning Commission
The Cabinet approved Deshmukh’s proposals, as the Finance Minister, to assign national income estimation and that of a National Sample Survey to the Indian Statistical Institute, of which he had been the President since 1945. His suggestion to bring together statistical work dispersed across various departments under a Central Statistical Organization reporting directly to the Cabinet was also accepted and the CSO came into existence in May 1951.
The services of Dr JJ Anjaria and KN Raj were taken from the Reserve Bank of India. Anjaria became an Economic Adviser to the Finance Ministry and Head of the Economic Division of the Planning Commission, with Raj as Deputy Chief. Their services were critical in drafting the First Five Year Plan. As Finance Minister also, Deshmukh played a critical role in mentoring economists at the ministry and providing them with adequate international exposure. Many of them made their mark in international financial institutions and their training institutes.
First and second plans
Apart from constituting the Planning Commission, Deshmukh’s tenure as the Finance Minister saw the formulation of the first and second five-year plans, in which the team he handpicked, mainly from the Reserve Bank of India, played a crucial role. At his suggestion, Nehru had PC Mahalanobis appointed as the Hon. Statistical Adviser to the Cabinet.
Deshmukh would also be instrumental in bringing together all statistics-related functions and activities under one umbrella institution, the Central Statistical Organization.
But, Deshmukh does not seem to have been happy with the increasingly socialistic turn that planning in India was taking. He tried to balance the increasing influence of Russian and other left-oriented economists and statisticians many of whom also spent long periods at the Indian Statistical Institute which he continued to preside over, with economists who preached free market principles. In fact, Milton Friedman’s first and longest trip to India came about after the head of America’s aid agency agreed with the sympathetic Indian Finance Minister that a distinguished economist should be brought to India “to consult on planning.”
Taxation enquiry
Dr John Matthai, Deshmukh’s predecessor as Finance Minister, kindly agreed to chair a Taxation Enquiry Committee. To further examine some of their recommendations, Deshmukh had Nicholas Kaldor invited by the Indian Statistical Institute to study and report. His recommendations included a wealth tax, a capital gains tax, a reduction in personal income tax to a maximum of about fifty-six percent, and an expenditure tax to counter large-scale tax evasion.
AIRCSC
Deshmukh wrote that, to give an impetus to rural credit, he asked the Finance Secretary, KG Ambegaonkar, to write to Benegal Rama Rau, the Reserve Bank Governor, to institute a “fact-finding enquiry.” As a first step, a conference was held, which suggested that a small expert committee conduct a survey. Accordingly, an All India Rural Credit Survey Committee was constituted with AD Gorwala as the Chairman, DR Gadgil and B Venkatappiah as members, and NSR Sastry from the Reserve Bank as Member Secretary (In his autobiography, Deshmukh wrongly refers to Gadgil as the Chairman). The Committee’s recommendations led to the nationalisation of the Imperial Bank of India and banks in former princely states. As Reserve Bank Governor, Deshmukh was against nationalisation of the Imperial Bank considering it too early. But, this time he went with the Committee’s recommendation.
Public Administration
Deshmukh was also instrumental in getting Paul Appleby, a noted American expert on public administration and Ford Foundation consultant, to report on public administration in India. Two recommendations, establishing an Indian Institute of Public Administration and the institution of Methods and Organization Divisions in Central Government ministries, were implemented immediately. Years later, in 1968, the Reserve Bank of India would also set up its own O&M Division.
In a related anecdote, the first Administration Reforms Commission, headed by K Hanumanthaiah, former Chief Minister of Mysore (now Karnataka) and Union Railway Minister, again reviewed public administration. Among his achievements was the construction of the majestic Vidhana Soudha in Bengaluru.
The work started in 1966 with Morarji Desai as the Chairman and continued with Hanumanthaiah after the Congress split. Hanumanthaiah had the reports released sometime in the mid-1970s. Paul Appleby, who was in India, released the 20 reports. From what I recall reading in those days, Appleby looked at all 20 volumes and commented that he felt humbled by the massive reports because his report was only 70 pages long. The irony was lost on Hanumanthaiah, who beamed from ear to ear.
ICICI and IFMR
Among other developments was the establishment of Industrial Credit & Investment Corporation, in collaboration with the World Bank and Indian industrialists, and with one of the Arcot twins, Sir Arcot Ramaswamy Mudaliar, as its first Chairman (not Iyer, as Deshmukh mistakenly mentions). ICICI would later be instrumental in instituting the India Investment Centre, the Institute for Financial Management and Research, now the KREA University, and the ICICI Bank.
Companies Act
A committee under CH Bhabha, former Union Industries Minister, examined the Companies Act and reported in 1953, recommending its revamping. The amendment bill was introduced in Parliament in 1955 and passed in 1956. The new Act would stand for over half a century before the fast-changing complexities in the corporate world and its environment required another massive overhaul.
Life insurance
Importance
Deshmukh wrote that “if the history of the first decade after India attained independence is correctly written, my name may be mentioned as that of the Finance Minister of India who nationalised the Life Insurance business, when everything else is forgotten.” Such was the importance he attached to nationalising life insurance.
Dalmia case
Towards the end of 1955, when the company law was being revamped, Deshmukh received reports of fraudulent practices of Seth Ramakrishna Dalmia that affected shareholders’ interests in about a dozen companies. Deshmukh instituted an inquiry by an Accounts Officer, which substantiated the allegations. The report established dealings between Dalmia’s different companies for amounts aggregating Rs. 4.74 crore. The diversion of funds with proceeds of sale of goods that were not brought into the books was also established.
The Vivian Bose Commission was appointed in consultation with MC Setalvad, the Attorney General, and in view of the huge amounts and large number of companies involved. At the same time, reports were also received about the embezzlement of Rs. 2.25 crore from the Bharat Insurance Company, which was confirmed through an inquiry. Dalmia was later convicted and sentenced.
Announcement
Deshmukh and HM Patel, the finance secretary, had been working towards nationalising life insurance. Over the previous few months, detailed preparations were made including for sending officers to travel and take over companies after the Ordinance was issued. The Bharat Insurance affair provided the necessary spark to implement the plan. HM Patel obtained the concurrence of the Industries Minister, and Deshmukh secured the PM’s approval. The same day, 19 January 1956, at 8.30 pm, Deshmukh announced the nationalisation over the All India Radio. Even the AIR officials did not get to see the script. The same night, the President Rajendra Prasad signed the ordinance. The following day, at 9 am, the department officials walked into the offices of 245 life insurance firms and took over their businesses. Deshmukh considered the nationalisation of life insurance “as one of the best-kept secrets of the Government of India for all time to come.”
Resignation
Earlier resignations
Deshmukh submitted several resignations over the years. As it is, he inherited his predecessor Matthai’s disenchantment with planning. He was also unhappy that the PM had announced the Kosi project in Bihar without consulting his ministry. In May 1951, Deshmukh wrote to Nehru requesting that he accept his resignation as early as possible. Deshmukh was protesting the latter’s unconstitutional methods. Nehru was reluctant to consider US assistance in providing two million tons of foodgrain as “aid.” In his reply, Nehru wrote that Deshmukh’s stand was “ungenerous,” given the circumstances.
Deshmukh repeated his request to be relieved, in October 1951. He stated that he could no longer work with Nehru “with satisfaction, conscience and self-respect.” This time what upset him was that neither Nehru, nor the other ministers, nor the state governments were willing to submit themselves to financial discipline. In particular, the attitude of the Food and Agriculture Minister, Rafi Ahmed Kidwai, was what got his goat. Among other things, he announced decontrol in food even before the Cabinet considered it. The Finance Ministry would have to carry the brunt: large imports, continued subsidies, rampant inflation, bankruptcy, uncontrollable depreciation of the rupee!
A third resignation, a formal one, came in March 1954. This was preceded by Nehru suggesting discontinuing financial control if budget was not exceeded. This was to avoid delays in completing plan projects. Deshmukh considered this impracticable. Nehru repeated other ministers’s complaint, of the finance ministry becoming a Super Ministry. He advised Deshmukh to understand local pressures, stress and strain. Deshmukh called this ‘political expediency.’ After Nehru got back criticising the finance ministry of ‘limited outlook,’ Deshmukh suggested setting up a National Development Council. The exchanges continued with even TT Krishnamachari complaining about the finance ministry’s ‘pinpricks.’ Support poured in for Deshmukh. He stayed on.
Final resignation
On 22 January 1956, Deshmukh announced his resignation. When it was finally accepted, he gave a lengthy explanation to the Lok Sabha on 25 July 1956. He charged the Prime Minister with “cavalier and unconstitutional” methods, drawing comparison with the bifurcation of Madras in 1953. This was his reaction to Nehru’s unilateral announcement on 16 January declaring Bombay as a centrally administered territory. He did not want to share the responsibility. Nehru’s announcement, according to Deshmukh, prejudiced the deliberations of the Select Committee which examined the recommendations of the State Reorganisation Commission. It is worth quoting from that speech:
This instance is typical of the cavalier and unconstitutional manner in which decisions have been taken and announced on behalf of the Cabinet including the Prime Minister in matters concerning the reorganization of States. The separation of Andhra from Tamil Nad was decided upon and announced by the Prime Minister without reference to the Cabinet. The decision of last January in regard to placing Bombay City under central administration was again without prior reference to the Cabinet, whose previous decision was, Bombay should be made a City State.
He continued:
In any case, I have a grievance in that I was not consulted in regard to the specific decisions announced, although as a Minister specially interested territoriallly and electorally at least common courtesy demanded that I should have been. My complaint is that the Prime Minister and the Committee of three have arrogated to themslves powers not delegated to them by the Cabinet as a whole.
Another issue:
That the ruling party should have thought it fit to order an enquiry into the Hoshiarpur lathi charge when they resolutely refused to order an enquiry into the Bombay firings to my mind shows an animus against Maharashtra with which I refuse to associate myself.
Final blow:
These matters, viz., usurpation of the powers of the Cabinet by an inner circle and the denial of civil liberties by giving a carte blanche to the Bombay Police, have a bearing on public interest going far beyond the range of the dispute over Bombay City. Violence can only be curbed by justice and rational behaviour. The aggressive non-violence of many men responsible for the Bombay decision will do far more to disrupt the unity of the country than outbursts of violence, which no sane man will condone and which must be dealt with firmly, but not brutally especially where hundreds of palpably innocent citizens are involved.
For the record, Nehru accepted fully responsibility for the parting of ways. He refused to respond to substantive points which were either personal in nature or related to proceedings of the Cabinet which could not be discussed.
Marshall Windmiller, quoting the Times of India, wrote that Nehru replied, “quivering in emotion,” as follows:
I am also something after all. I am the Prime Minister of India and the Prime Minister is the Prime Minister. He can lay down the policy of the government.
I too know something about democratic procedure, about party procedure. I know something of what the Prime Minister’s duties are and that in the Constitution the Prime Minister is the linchpin of the Government. To say that the Prime Minister cannot make a statement is a monstrous statement itself.
But I could not find the above in the Parliament proceedings. It was probably made elsewhere.
Khushwant Singh, in his rather vituperative review of Deshmukh’s “autobiography” (Deshmukh did not consider it one), called this decision “rash and premature,” because Bombay city remained with the State, and Nehru did not take Deshmukh back. Nehru did indeed have a soft corner for Deshmukh, inviting him often to his residence for dinner. He once introduced Deshmukh to the British High Commissioner as “my most charming minister.” Nehru was also one of the two witnesses to the civil registration of the marriage of Deshmukh and Durgabai. But, he did dissuade Deshmukh from resigning.
Real reasons
In his memoirs, Milton Friedman observed that Deshmukh was much less opposed to the market than Mahalanobis and speculated that that was why he “resigned as finance minister the next year to assume the unimportant position of chairman of the University Grants Committee.” IG Patel echoed similar views in his memoirs published a few years later.
Deshmukh was not unenthusiastic about planning. But, he did not show much enthusiasm either as one can see from his speeches at the legislative assembly of the Central Provinces. He did constitute the Planning Commission and oversaw the framing of the first and second plans. He also chaired a 20-member committee of economists. But, he seems to have had reservations regarding the ‘socialistic pattern’ that the Congress’s Avadi Session endorsed in the previous year. More than a decade later, in 1969, his candidature for President, supported by right-wing groups led by the Swatantra Party, further confirms this view.
Fund offer
Nehru’s suggestion
According to Deshmukh, after his resignation, Prime Minister Nehru sought his views on a likely posting as the Managing Director of the IMF. He had received some inquiries in this regard. After consulting his wife Durgabai, Deshmukh chose to remain in India. There is no independent confirmation of this offer. But, rumours in the mid-1940s went that Lord Keynes, impressed with Deshmukh, wanted him to be the Fund’s first Managing Director. According to Keynes, the story goes, a candidate from a developing country, and immune to big power pressures, would give the new institution greater independence.
Outcome
A vacancy did arise in 1956, the year Deshmukh resigned as the Finance Minister. Per Jacobsson, the Swedish economist who was the first and longest serving chief economist at the Bank for International Settlements from 1931 to 1956, filled the post. He remained as the MD of the IMF till his death in 1963. The Per Jacobsson Foundation, whose current chairman is Raghuram Rajan, former Reserve Bank of India Governor, holds an annual lecture in his memory. Deshmukh was the first among the former Governors of the Bank to deliver the lecture in 1965.
My take
In my view, granting that somebody did make inquiries with Nehru, it must have been a roving inquiry. It probably served the purpose of satisfying certain quarters that the Fund considered somebody from the Third World. It is highly unlikely that Deshmukh could have spoiled the chances of Per Jacobsson who had strong credentials in economics and law, and a sterling career as international civil servant going back to the League of Nations in 1920 and as the chief economist of the Bank for International Settlements for a quarter century. Moreover, the Fund never appointed a non-European as its Managing Director, either before or after.
As for Keynes, he was unwell for most part of the Conference. Deshmukh wrote that he “did not get to see much of him.” At the farewell banquet, Keynes told Deshmukh: “I hope you will have great influence for good in your country.” This is mere polite courtesy and hardly an endorsement for the post of Managing Director of the Fund. Moreover, Keynes’s influence was already on the wane. He passed away less than two years later. It is unlikely that he would have been able to influence the selection of the Managing Director of the Fund. Ultimately, it was the views of HD White, the leader of the US delegation, which prevailed over the Conference’s final outcomes.
Institutions
In the last phase of his life, Deshmukh was known as an institution builder. He continued in this role till his last day. Apart from the ISI, CSO, UGC, IIC, and the Delhi University, it included many others.
UGC and others
Not long after Deshmukh’s resignation as the Finance Minister, the government offered him the chairmanship of the University Grants Commission (UGC). He accepted it. Many like Friedman criticised it (see above). Some like Khushwant Singh ridiculed it (see a future post). But, this was neither the first nor the last of several roles where he earned a reputation as an institution builder. Nor were these limited to finance or education. These included the following, in chronological order:
- Life Member and Member, Advisory Committee, Bombay Natural History Society, 1932-82
- President, Indian Statistical Institute, 1945-64
- Chairman, Board of Governors, Doon Public School, 1950-61
- Chairman, University Grants Commission, 1956-60
- Chairman, National Book Trust, 1957-60
- Founder and Life President, India International Centre, 1959-82
- Chairman, Administrative Staff College of India, 1959-73
- Vice President, Indian Council for Cultural Relations, 1960-67
- Vice-Chancellor, University of Delhi, 1962-70
- Chairman, Indian National Committee, World University Service, 1962-72
- Chairman, Indian Institute of Public Administration, 1963-64
- President, Council for Social Development, India International Centre, 1964-82?
- President, Institute of Economic Growth, 1965-74
- Chairman, Central Sanskrit Board, 1966-67
- Vice Chairman and Member, Board of Trustees, United Nations Institute for Training and Research, 1966-1970
- President, Population Council of India, 1970-82
- Vice Chairman, Indian Institute of Advanced Studies, Shimla
- Director, Press Trust of India
- Member of Governing Board, Institute for Educational Planning, UNESCO
But, perhaps the longest and among the most important of these was, apart from that at the India International Centre, his role at the Indian Statistical Institute.
The ISI
Mahalanobis
Deshmukh and Mahalanobis first met in 1920 when Deshmukh came to Calcutta, after his return from England, where he had joined the ICS in the previous year. He had come to report to the Government of India which would post him to Central Provinces and Berar. On this visit, as recommended by a common friend, Deshmukh stayed with Mahalanobis at his Calcutta residence.
They met a second time, in Simla, only after about eighteen years. Mahalanobis was there to meet Sir Theodore Gregory, Economic Adviser, regarding a small grant for the Indian Statistical Institute (ISI) he founded in 1931. It was at this meeting, around 1937/38, that Deshmukh informed Mahalanobis of his earlier work on sampling of crop yields.
On his next visit to Calcutta, as Deputy Governor, while accompanying Governor Taylor, he called on the Mahalanobises. Deshmukh would soon become a member of the ISI and their friendship would bloom into a long lasting one over the next few decades. He became ISI’s President in 1945.
Sampling
As we saw earlier, Deshmukh had conducted sample survey in Raipur District where he was Settlement Officer. For this, he had followed the methodology used by Sir John Hubback ICS, in Bihar and Orissa in the early 1920s. Hubback published his method in the paper, Sampling for Rice Yield in Bihar and Orissa (Bulletin No 166, Agricultural Research Institute, Pusa, Bihar, 1927).
Scaling up sampling
In their meeting at Simla itself, Deshmukh and Mahalanobis had exchanged ideas on sample surveys, with Deshmukh sharing details of his work in Raipur which were in turn based on the pioneering work of Sir John Hubback. More than anything else, I think this common interest was what brought them closer. As Deshmukh wrote, “…increasingly I felt a sense of involvement in Mahalanobis’s work in statistics and a growing desire to help him in obtaining financial support from the Government of India. As Deputy Governor and later Governor of the Reserve Bank of India, I had some influence with the Finance Ministry and felt I should use it in what appeared to me to be a decidedly deserving cause.”
Among the plans they discussed in 1948-1949 was the scaling up of the sample surveys to the national level. This became a reality, like other innovations, only after the Planning Commission came into existence, Deshmukh became the Finance Minister and Mahalonobis became Honorary Statistical Adviser to the Cabinet. At Deshmukh’s instance, the Cabinet approved a National Sample Survey for estimating various economic parameters. The responsibility for designing the survey and processing the results went to the ISI. The ISI also became responsible for collecting data in West Bengal and Bombay City to get a feel of the challenges. For the rest of the country, the National Sample Survey Directorate collected data.
National Surveys
The year after Deshmukh took over as President, Mahalanobis became a Fellow of the Royal Society (U.K.), mainly for his contribution to large-scale sample surveys. Sir Ronald Fisher, the pioneering statistician and geneticist, who was a frequent visitor to ISI, played a critical role in this. But, Deshmukh played a different role in sparking Mahalanobis’ interest towards such sample surveys.
Mahalanobis as FRS
Incidentally, Mahalanobis’s paper, On Large Scale Sample Surveys, was the basis for his selection as an FRS. As I will explain in another post dedicated to Mahalanobis and the ISI, his FRS had the wholehearted support of Sir Ronald Fisher, the eminent statistician, who was a frequent visitor to ISI. On one occasion, Fisher’s daughter, Joan Fisher Box, also accompanied him. In her detailed biography of her father, she has warm recollections of her visit. She also describes her father’s earlier visits.
Prior to its publication in October 1944, Mahalanobis had to apend a detailed reference in the original draft to the original Hubback paper at the proof stage. He attributed its omission to misplacing the copy of the Hubback paper. The appended note concludes thus, speaking of Hubback’s paper: “The basic concepts of both the cost and the variance functions thus occur in an incipient form in his paper much earlier than any paper cited here.”
Financial security
Perhaps Deshmukh’s biggest contribution to the ISI was ensuring its financial security. When Deshmukh became President in 1945, it was financially unstable and insecure. It was not in a position to implement Professor PC Mahalanobis’s ambitious plans for the institute, which he founded in 1931. There was a time much earlier, especially in the pre-independence days, when Mahalanobis faced much humiliation, going from desk to desk in various ministries seeking small amounts of assistance. Deshmukh played a significant role, especially after he became the Finance Minister, in getting the required funds to run the Institute. Thanks to his efforts, the Institute got, in the late 1940s, an annual grant of Rs 5 lakh. This was the first step towards the Institute getting greater financial independence. It eventually played a role in the statutory declaration of the ISI as an institution of national importance in 1959.
Research and Training
Deshmukh was instrumental in securing finance for the Institute’s Research and Training School. Prof CR Rao, who belonged to the first batch of students at the ISI, would become the first Head and Director of the School for over four decades.
Quality Control
The invitation extended by Deshmukh to Dr Walter Shewhart, renowned expert on Statistical Quality Control, was the first step towards introducing quality control in India. Subsequent visits of Dr Shewhart, Edward Deming, E.R. Ott and others, working mostly at the ISI, took this work forward.
In addition, the Cabinet decided to establish a Central Statistical Organisation at Mahalonobis and Deshmukh’s initiative.
National Income
Work towards the computation of national income had started in 1946, steered by Sir Ardeshir Dalal, Member of the Viceroy’s Executive Council. The complexity of the work and differences among the experts resulted in the work not achieving much progress. Considering that these estimates were critical to assess planning, this work was also transferred to the ISI before it was eventually transferred, along with that of the National Sample Survey, to the CSO about two decades later.
Planning Division
In 1954, Deshmukh asked Mahalanobis whether the ISI could frame a plan for solving unemployment and rapidly growing national income. This required working jointly with the Planning Commission, the CSO and the Ministry of Finance. Mahalanobis approached this as an operational research problem. His report, accordingly, was titled “The Approach of Operational Research to Planning in India.” This would form the basis of preparing a draft plan frame for the second five year plan. The ISI set up a Planning Division to take forward this work on a long term basis.
Visiting Statisticians
In his autobiography, Deshmukh stated that, at his suggestion as the Finance Minister, the Institute invited a number of eminent statisticians from other countries to review the work on the National Sample Survey. The Institute had a long tradition of inviting not only eminent statisticians but also economists, mostly from Europe and the US, to spend long periods on its Calcutta campus; some of them even offered courses and trained young statisticians. I will elaborate at length on the ISI and its visiting economists and statisticians in another post.
Resigns again
Deshmukh resigned as President in 1964. So did Mahalanobis. The reasons are not clear, but it could be because of advancing age. I suspect it could also be because of the adverse audit findings of that year or the previous year. I will explain in another post. Deshmukh’s autobiography shows that he continued as Honorary President. Ashok Rudra, in his biography of Mahalanobis, wrote that Deshmukh’s bond with the ISI ended only with his death in 1982.
Other interests
Lectures as books
Over the years, Deshmukh delivered lectures at various forums, especially after his tenure as Finance Minister. Many of these came out in print. Most famously, his Kale Memorial Lecture at the Gokhale Institute, Pune, became Central Banking in Retrospect. It elaborates on the developments in the early years of central banking in India, which he witnessed in different capacities.
To list a few, Deshmukh’s Dadabhai Naoroji Lectures became Economic Developments in India 1946-56 (1957). His Srinivasa Sastri Memorial Lecture at the University of Madras became Citizens of No Mean Country (1959). Prerequisites of Development in Under-developed Countries (1962) was his Kinkhede Memorial Lecture at Nagpur University. Deshmukh’s AD Shroff Memorial Lecture for the Forum of Free Enterprise became Free but Fettered – The Illiterate Citizen (1970). The Commonwealth as India Sees it (1963) is his Smuts Memorial Lecture delivered at Cambridge University.
Other lectures published as short books include the following:
- The balance between monetary policy and other instruments of economic policy in a modern society (Per Jacobsson Foundation, 1965)
- Perspective planning and education for economic and social development (1965)
- Social change in India (Two lectures at the Asian Institute for Economic Development and Planning, Bangkok in February 1964, 1965)
- Management and administration: New trends (Training Division, Department of Personnel, 1972)
- Hindustani: Rashtrabhasha or Lingua Franca? (Mahatma Gandhi Memorial Research Centre, Hindustani Prachar Sabha, 1972)
Other lectures
His lectures at various universities, including their convocations, came out in two volumes: In the Portals of Indian Universities (1959) and On the Threshold of India’s Citizenhood (1962). Several of these lectures and other writings were compiled and published as Reflections on Finance, Education and Society (1972). Another collection of essays/speeches was published in the same year as Aspects of Development.
Other English books
He also wrote a short book on the life and work of DD Kosambi, the eminent mathematician and historian.
Deshmukh’s autobiography was titled The Course of My Life: Autobiography (Orient Longman, 1974). His second wife, Durgabai Deshmukh, a lawyer and member of the Constituent Assembly and Planning Commission, whom he married in 1953, wrote her memoirs titled Chintaman and I (Allied Publishers, 1981).
Sanskrit and Marathi
I have written elsewhere on Deshmukh’s interest in botany and horticulture (see here). Among his other enduring interests was Sanskrit, for which he won the first of two Jagannath Shankarsett scholarships as a student. Deshmukh sustained this interest over the years, often peppering his Parliament speeches with verses from various Sanskrit texts.
In 1943, Deshmukh translated Kalidasa’s Meghadutam into Marathi. He rendered into Sanskrit selected sayings of Mahatma Gandhi, along with the original, in his Gandhi Sukti Muktavali, published in 1957. In 1968, Deshmukh published Sanskrit-Kavya-Malika, a selection of his Sanskrit poems . He followed this up with Bhagvad Gita: Commentary in 1976. His Dhammapada: Study of the Doctrine of Buddha came out in 1977. In 1981, he also translated Amarasimha’s Amarakosa from Sanskrit to English.
Honours
More than a dozen universities bestowed Deshmukh with honorary doctorates. In addition to the Universities of Princeton (1963) and Leicester (1963), it included the ISI Calcutta (1963) and various Indian Universities, including Calcutta and Annamalai in 1957, Mysore, Nagpur and Punjab in 1959, Karnatak University, Dharwar, in 1963, Poona, Delhi, and Guru Nanak University in 1973, and Osmania, Hyderabad and Allahabad Universities in 1978.
In 1959, Deshmukh received the Ramon Magsaysay Award for Government Service for his contributions to Indian and international finance and administration.
CD Deshmukh and his wife, Durgabai Deshmukh, were awarded the Padma Vibhushan in 1975.
Economic and Social Development: Essays in Honour of Dr. C.D. Deshmukh is a collection of essays edited by S.L.N. Simha and published by Vora Publishers, Bombay, in 1972.
Concluding note
Deshmukh passed away in Hyderabad on 2 October 1982. His legacy lives on through the many institutions he built, developed, and nurtured, and the values he espoused.
The Jesus College Reporter noted in its obituary on their alumnus: “Dr. Deshmukh was an enigma. He had a deep sense of the culture and heritage of India but also was westernised to his fingertips”. The Reserve Bank of India, the National Innovation Foundation, and the India International Centre (IIC), among others, hold CD Deshmukh Memorial Lectures. In 1996, on the occasion of Deshmukh’s centenary, the Reserve Bank of India published a collection of Deshmukh Memorial Lectures. The IIC, which holds the lectures every year diligently, brought out a volume on the occasion of his centenary in 1996.
As mentioned earlier, Deshmukh delivered the Per Jacobsson Lecture in 1965. Drawing on his vast experience across the world, he concluded the lecture thus:
It is not, however, easy to generalise about the relative importance of these various instruments of economic policy. Every country in this respect, therefore, is sui generis. Broadly, it can be said that the choice among alternative policy instruments is governed more by administrative ability, institutional features of the economy and political sagacity. In a sense, this is an area more for an act of economic statesmanship than for the rumination of an economist or the caveats of the central banker. But economic statesmanship is a scarce commodity in developing countries in the prevailing environment of impatience, the glamour of power and warped judgment. All such handicaps imply a price to pay in the shape of slower progress if costly errors of judgment are to be avoided.
The future would remember CD Deshmukh as an economic statesman and an institution builder par excellence who stood uncompromisingly for principles he held dear. Above all, he was one of the vital links that bridged the transition of governance from pre-independence to post-independence India, making the birth of the new nation less painful than what it could have been.
The Princeton University’s citation conferring Deshmukh with an honorary doctorate concluded:
A botanist by training and a gardener by avocation, he believes, unlike Candide, in cultivating many gardens.
© G Sreekumar 2025
