Amaresh Bagchi: Public Finance Economist Par Excellence

A tribute to Amaresh Bagchi, a discussion of his academic career, his many interests in public finance and federalism, and an outline of his important contributions in policy formulation by a friend and colleague of many years

M Govinda Rao (mgr@nipfp.org.in) is with the National Institute of Public Finance and Policy, New Delhi.

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Amaresh-da was a part of NIPFP for almost 28 years, and director for 10 of those years. The teacher, who many a youngster could walk to with his problems, will not be there to patiently listen and find solutions. Many young scholars from the institute and outside had spent hours learning the nuances of public finance data and discussing some theoretical or conceptual issue relating to tax policy, public choice, fiscal federalism or intergovernmental transfers. The NIPFP library was going to miss a regular visitor, who with his quest for knowledge could put many a youngster to shame. He looked at every new book that the library acquired, searched for papers to read and goaded others to read the good ones.

The pre-eminent scholar in applied public finance in India, Amaresh Bagchi, had an enthusiasm to learn and understand that was matched by few. He was actually ended up harming them. He travelled long in the ideological highway and yet never embraced the market without moderation. While he agreed that the government’s benevolent role could not be taken for granted, he was not willing to go as far as to denounce the government as malevolent. Naturally, he was the bridge between the left and the right and was equally at home with scholars across the ideological spectrum.

Outstanding Scholar

Amaresh Bagchi was a man immensely liked and respected by the public finance community. He was humility personified; he was humble and yet upright, generous in sharing, passionate in his views but open to change with the times, and simple to the core but sophisticated in thinking. It is difficult to think of another person like him. In his passing away, the public finance profession has lost an outstanding scholar, who analysed fiscal matters with his feet firmly on the ground, who always kept the interest of the poor and commoners at the back of his mind, and who recommended policies keeping in view the administrative constraints and realities. With his passing we have lost one of the votaries of change who served the cause of tax reform in the country in the last few decades with distinction.

Amaresh-da’s academic career followed an unusual path. He was born in Malda in West Bengal in August 1930, studied in

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Presidency College what was then Calcutta and after his master’s degree joined government service as an officer in revenue administration in the income tax (IT) department. The 15 years he spent in the IT department was to be his strength in his subsequent academic career. While in service, he pursued some of high profile cases including those of prominent politicians from eastern India with unmatched tenacity, and he walked miles and miles to collect evidence facing not only inconvenience but also threats (see D N Ghosh, ‘Amaresh Bagchi: A Tribute’, EPW, March 1).

Passion for Public Finance

As time went by, Amaresh-da found the work of the IT department too narrow for his liking and the academician in him woke up to pursuits in policy research. After a year at Centre for Economic Studies in Presidency College as a senior fellow, he returned to Delhi to complete his PhD on the ‘Concept of Income in Taxation’ at the Jawaharlal Nehru University. This is still perhaps one of the finest works on the subject and in fact, only last year Raja Chelliah had suggested that he revisit the area and write a book on the history of income taxation, a task he took up but remained incomplete. When he was first appointed in the revenue and banking department of the finance ministry in the mid-1970s, it was Manmohan Singh who got him to work in the department of economic affairs where at that time and again in the mid-1980s he had the opportunity to work with persons of rare intellect including Manmohan Singh himself, Bimal Jalan, Montek Singh Ahluwalia and Shankar Acharya.

Amaresh Bagchi’s first love was public finance. Raja Chelliah fondly recalls his association with Amaresh-da since 1975 when he took up the ambitious task of building the think tank. Amaresh-da’s involvement with the institution began from the time it was conceived. It did not require much persuasion for him to join the institute as its RBI chair professor in 1980, a position he occupied for two years before rejoining the ministry. He returned to the institute as its director in 1985, which he served with distinction until February 1995. Thereafter, he was the emeritus professor, the elder statesman at

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NIPFP, and this gave him time to focus on research, interact with youngsters and do more policy work for the government.

As a member of the Eleventh Finance Commission, he was unhappy with the approach the commission took and particularly the way it dealt with the additional term of reference given to it in the wake of protestations on the recommendations by the then chief minister of Andhra Pradesh. He wrote a note of dissent highlighting the inappropriate design of the incentivelinked transfer scheme the commission recommended.

At the time of his death he was still engaged in serious research as a member of the commission on centre-state relations. He had put in efforts to complete the questionnaire of the commission, which he gave personally to some of his colleagues at NIPFP with the express command that we should find time to comment on it. His inquisitiveness, zeal, willingness and capacity to learn new things were as passionate and intense when he passed away as they were 30 years ago when I first met.

Work on Taxation

Amaresh-da covered a vast canvass in his public finance research. His initial work was on taxation of income, but he later branched off into property taxation, value added taxation, and fiscal federalism and decentralisation. The experience of tax administration in the IT department in the early part of his career gave him significant advantage to undertake policy relevant research in income taxation. Although he wrote a number of important articles on income taxation, the perfectionist in him did not allow him to publish all he wrote including his doctoral thesis, which is a masterly work and is a must-read for any student working in the area.

A lot of research Amaresh-da undertook in the initial years was for various committees and commissions he served. Mention must be made of the early work on presumptive taxation in agriculture for the K N Raj Committee on taxation of agriculture in the early 1970s, which he served as an adviser. He probed the subject even after submitting the report and wrote a well researched article on agricultural holdings tax. His work for the Committee on Fiscal Policy for Employment Generation chaired by V M Dandekar was equally impressive. The most important contribution by him was on value added tax. The Expert Group on the Reform of Domestic Trade Taxes in India in 1994-95, of which he was the con venor, provided a clear exposition of the pro blems of prevailing sales tax systems and explored reform options including alternative approaches to phasing out the contentious central sales tax. In the Tax Reforms Committee of 1991-92, he was one member Raja Chelliah relied on heavily.

The study on property taxation in West Bengal in 1983 in which he examined the alternatives of rental value and capital value systems for determining the base remains an important reference volume for students and practitioners of municipal finance. The study on tax administration he undertook in collaboration with Richard Bird and Arindam Das-Gupta was also an important contribution in this much neglected area.

Although tax system reform was his first love, he branched off into many other areas. The paper Amaresh-da wrote with Pulin Nayak, ‘A Survey of Public Finance and the Planning Process: Indian Experience’, for the International Seminar in Public Economics (ISPE) in 1990 which was published in the volume he edited with Nick Stern is a classic treatment of the subject that is much referred to.

Interest in Federalism

In the latter part of his career, Amaresh-da developed a keen interest in fiscal federalism and intergovernmental finance and approached the subject from the perspective of theory rather than politics. His liking for the subject started with a review article he wrote on the two books by the Australian scholar, Russel Mathews in the Indian Economic Review. In subsequent years he went into the issue and my association with him took deep roots with the passage of time due to the common love we had for the subject. Indeed, Amaresh-da championed the cause of states’ fiscal autonomy, was against imposition of conditionalities and therefore detested the proliferation of schemes which either constrained the states’ fiscal freedom or

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much more to remedy the situation. There was fru stration, for he wanted the state to do well.

Amaresh-da’s most important contribution to students is Readings in Public Finance, the book he edited in 2005. This is a fascinating compilation of some of the most important contributions on public goods, public choice theory, theoretical and policy issues in taxation, macroeconomic linkages of fiscal policy and fiscal federalism. The gem in the entire collection is surely the concluding essay he wrote on the book he admired, Public Finance and Public Choice: Two Contrasting Visions of the State, which recorded a week-long symposium between two giants in public finance, Richard Musgrave and James Buchanan. The symposium reviewed 50 years of developments in public finance. The former still believed in the benevolent state and the latter believed that special interest groups can make the state malevolent. Amaresh Bagchi’s essay in the readings succinctly captures his admiration for the two giants in public finance and must be savoured by students and experts alike.

In building the NIPFP, Amaresh Bagchi’s contributions have been immense. Raja Chelliah counted on him for support and he got it in immense measure in the formative years. The 10 years he guided the institution as its director firmly placed the institution as a major think tank. He encouraged collaboration with other institutions, notably with the Indian Statistical Institute and Delhi School of Economics.

Amaresh-da edited some important books such as Tax Policy and Planning in Developing Countries, State Finances in India, the Report of the Ninth Finance Commission: Before and After and the Readings in Public Finance (referred to above).

He wrote extensively in Economic and Political Weekly on virtually every fiscal development in the last 40 years. He was close to Krishna Raj, the late editor of this journal, and would readily accede to his requests for papers on contemporary fiscal policy issues and often obliged him with editorials. The romance with EPW continued after Krishna Raj and went on until the very end. On several occasions, he would discuss with us the editorials he was writing to get our views on these subjects.

We will all miss Amaresh-da. And, for me, his advice and guidance in managing the affairs of NIPFP have been invaluable. He leaves behind a large community of friends who will miss him and his writings. Without Amaresh-da, we feel truly diminished in the world.

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