Father of India’s Tax Reforms
As
India celebrates the 25th anniversary of economic reforms this year, much has
been spoken and written about the reforms. In 1991, when the country faced a
precarious situation, structural reforms were undertaken to change the course
of India’s economy, of which tax reforms were an important part. Integral to
these taxation reforms was the Padma Vibhushan recipient Dr. Raja Chelliah,
famously known as the “father of India’s tax reforms”.
EDUCATION -
Born on 12 December 1922, Dr. Raja Jesudoss
Chelliah graduated with a master's degree in Economics from the University of
Madras. He then worked as a lecturer in Madras Christian College for five years
before going to the United States on a Fulbright scholarship to do a PhD at the
University of Pittsburgh.
BEGINNING OF A STELLAR CAREER IN PUBLIC
FINANCE -
After graduating from the University of
Pittsburgh, Dr. Chelliah took a job in the National Council of Applied
Economics Research (NCAER) in 1958 for a short period where he worked on the
economic and functional classification of budgets. He then moved on to the
Rajasthan and Osmania universities, before joining the International Monetary
Fund (IMF) where he rose to become the Chief of the Fiscal Analysis Division in
the Fiscal Affairs Department of the Fund during 1969-75.
WORKING WITH GOVERNMENTAL INSTITUTIONS -
Dr. Chelliah returned to India in 1975
intending to settle and work with a field very close to his heart, India’s tax
system. He started the National Institute of Public Finance and Policy in 1976
as a think tank to work closely with the Ministry of Finance while remaining
autonomous. He became the founding director of the institution and later
returned as Chairman of the Board. The strong foundation he laid and the
tradition of policy research he established, has continued to shape the
institution as a premier think tank on fiscal policy.
As an institution builder, he was instrumental
in the establishment of Madras School of Economics in 1993 as an institution
that could excel in both teaching and research. He nurtured it from infancy to
maturity as the Founder Chairman.
He also worked closely with the government as
he served as an Honorary Consultant to the Ministry of Finance (1975-77), a
member of the Planning Commission and the 9th Finance Commission during
1985-90, the Chairman of the Tax Reforms Committee stating (1991) and the
fiscal adviser to Ministry of Finance.
His expertise in public policy was recognized
in other countries as well. In 1981, he was appointed as a consultant to the
government of Papua New Guinea on Centre Provincial Financial Relations. He was
also the chairman of the Tax Reforms Commission in Zimbabwe (1984-85) and
worked as an advisor to the Financial and Fiscal Commission in South Africa.
HARBINGER OF TAX REFORMS -
The concern with equity and efficacy also became the key factor in Dr. Chelliah’s approach to tax reforms in India. The first concrete opportunity came when he became a member of the Indirect Tax Reforms Committee headed by Shri L. K. Jha (1976-78). The idea of a manufacturing value-added tax (VAT) was floated at the time. Later, as the first Chairman of the Empowered Committee of the State Finance Ministers, he initiated the necessary steps for the implementation of a full-fledged VAT in India. He was one of the main architects of Tamil Nadu moving to the Value Added Tax (VAT) regime in 2003-04.
The major opportunity to usher in effective tax reforms in India came Dr. Chelliah’s way when, in 1991, he was appointed as the Chairman of the Tax Reforms Committee of the Government of India. In a series of reports, the TRC produced a set of wide-ranging recommendations aimed at changing the landscape of taxation under the guidance of Dr. Chelliah and his ideas of a rational tax system.
AS A RESEARCHER –
Dr.
Chelliah was not merely a policymaker, but also a great academician. He was an
author of nearly 15 books and various research papers. His basic study on
Fiscal Policy in Underdeveloped Countries is, perhaps, the most profound
contribution dealing with the problems of fiscal policy formulation in
developing countries. He laid enormous importance not merely on what was
written but also on how it was written. The focus always was on communicating
with the common man.
Dr. Chelliah made a salient contribution to every
major aspect of Indian Public Finance. In a career spanning almost 60 years,
Dr. Chelliah undertook his research on theoretical and policy issues on
subjects such as the concepts of the budget deficit, tax policy, and reforms,
allocative and technical efficiency in public spending, sustainability of
public debt in India, and intergovernmental finance. His focus was not confined
to fiscal policy issues alone; he put together an important book on Income,
Poverty, and Beyond and also worked on environmental taxes.
Some of his publications include Political
Economy of Poverty Eradication in India and Essay on Fiscal Reform; Eco taxes
on Polluting Inputs and Outputs; Reports on India’s Tax Reforms; Income Poverty
and Beyond; Towards Sustainable Growth: Essays in Fiscal and Financial Sector
Reforms in India.
RECOGNITIONS –
Recognizing
his contributions to the field of public finance, the Government of India
awarded the prestigious Padma Vibhushan to Dr. Chelliah in 2007. In 1989, he
was given the National Citizens Award by Shri Rajiv Gandhi. In 1993, the UGC’s
Swami Pravananda Award in Economics was given to him. In 1997, he was awarded
the ‘Financial Express Award for Economics’.
CONCLUSION -
Perhaps,
no other economist in India has made as many contributions to the realm of
Indian public finance as Dr. Raja Chelliah has. He belonged to the rare breed
of economists in the country who made tremendous contributions to applied
research in public finance and provided a strong analytical underpinning for
fiscal policy calibration. He passed away on 7th April 2009 leaving a legacy as
a fiscal policymaker, as a teacher of economics, as an institution builder, and
as a passionate reformer.
REFERENCES -
https://www.mse.ac.in/wp-content/uploads/2018/01/5th-RJC-Invitation.pdf
Credits -
1) Labhashree Shinde (SYBA)
2) Sagar Gala (SYBA)
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