Vijayendra Kasturi Ranga Vardaraja (V.K.R.V.) Rao was the doyen of economics of post-independence India. He founded two institutions that are central parts of the infrastructure of economic and sociological training and research in India: the Delhi School of Economics (DSE) and the Institute for Economic Growth (IEG). He also founded the Institute for Social and Economic Change (ISEC) in Bengaluru, a major interdisciplinary research and training centre. Many other notable institutions were also his brainchild, including the Indian Council of Social Science Research (ICSSR), the International Institute for Population Studies in Mumbai and the related network of population centres, and the Indian Institute of Foreign Trade (IIFT).    

Besides being a major institution builder, Rao was one of the pioneers of development economics and his early work in empirical and theoretical economics was extremely influential¹. His MA thesis from the University of Mumbai (formerly known as University of Bombay) on Taxation in India was one of the first empirical studies on the subject in a developing country. 

Perhaps his most important contribution was his PhD thesis in the University of Cambridge on India’s national income which was a pioneering effort to develop methods for estimating GDP with sparse data; and had a worldwide impact. His seminal paper ​“Investment, Income and the Multiplier in a Developing Country” was the first effort to assess the relevance of Keynes’ General Theory in a developing country arguing that Keynesian policies would be inflationary in the context of developing countries. It was required reading in development economics courses around the world for several decades. He also did the earliest work on calculating levels of food supply in India and their nutritive content.

Rao’s influence on development goes well beyond India. As the Chair of the UN Sub-commission on Economic Development (1947−1950), he laid the intellectual foundations for the International Development Association (IDA). The report of the commission (authored by Rao) spelt out the urgent need for a United Nations Economic Development Administration (UNEDA) to “(1) make technical assistance available to underdeveloped countries in preparing schemes for economic development; (2) To coordinate the technical assistance for economic development, which at present is available to underdeveloped countries; (3) To assist underdeveloped countries in obtaining materials, equipment, personnel; (4) To finance or help to finance such schemes of economic development …” and other principles which formed the basis for IDA and helped move the World Bank from an organisation primarily concerned with post-war reconstruction to one focused on economic development. This is a fundamental contribution for which he has not received adequate credit. 

Rao was born in 1908 in Kancheepuram in Tamil Nadu into a Kannada Madhva Brahmin family that had settled for many generations in the temple town of Srirangam. His father, Kasturi Rangachar made a precarious living as a priest, and in minor government posts. His father then shifted to Bombay (now Mumbai) and started practicing as an astrologer to some of the leading lights of Bombay’s commercial world. The uncertain income that came from this line of work were made even more precarious by Kasturi Rangachar’s predilection for gambling on horses. Consequently, Rao, his mother Bharathi, and his five siblings were always strained for resources. Rao was a particularly precocious child, and his parents decided to invest whatever resources they could muster into him believing that he would be their ticket out of poverty.

Rao enrolled in Wilson College in Bombay for his undergraduate education where he majored in economics and came under the influence of Yusuf Meherally, the great social activist who inculcated a strong sense of public purpose in him. Enthused by Gandhiji and the civil disobedience movement, he took to wearing khadi and in his words became a ​“lifelong khaddarite”. He took his MA in economics from the University of Bombay (now the University of Mumbai) under the supervision of C.N. Vakil (published in 1931 as The Taxation of Income in India). While Rao’s orientation towards planned economic development over free markets later led to disagreements with Vakil, he is a product of the Mumbai School of Economics. 

Feeling that he needed more intensive training in Economics, he applied for admission to the London School of Economics (LSE) and to the University of Cambridge culling together resources from loans and grants from the Tata Trust and various other sources. He decided to enrol as an undergraduate at Gonville and Caius College in Cambridge in 1932. He arrived in Cambridge at the height of its intellectual powers – Keynes was in the process of writing the General Theory, and with A.C. Pigou, Piero Sraffa, Joan Robinson, and Richard Kahn, was laying the foundations of 20^th century economics. 

Rao was invited (unusually for an undergraduate) to join Keynes’ famous Political Economy Club, which was a weekly symposium where work in progress was presented (including early drafts of the General Theory) and ruthlessly dissected. He won the Adam Smith prize for the best Economics student at the University of Cambridge which was a source of great pride for him. He also made lifelong friendships with his fellow students Alexander Cairncross and Hans Singer. Rao and his classmates also made weekly visits to the LSE where he became acquainted with John and Ursula Hicks, Abba Lerner, and Paul Sweezy.  Along with ​“20−30” of these young economists, Rao co-founded the Review of Economic Studies as a forum ​“to encourage younger writers who could not at that time easily get their articles published in established journals” (Rao, 2002). 

At the LSE, he took classes with Lionel Robbins which led him to strongly disagree with Robbins’ influential definition of economics as ​“the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Rao’s (1943) definition, while less succinct, is much more holistic: ​“Economic activity is of the nature of both ends and means activity; and its purpose is to secure exchangeable goods and services possessing economic value but in such manner as: (a) to satisfy the fundamental minimum requirements of the community for economic goods, (b) to occasion the minimum use of resources and ensure avoidance of waste in each act of production, and © not to hamper but to foster and promote the end of all human activity, viz., the development of human personality.” Rao, in fact, strongly believed that economics should not be studied in isolation but in its social and political context – an approach that he implemented in the DSE, IEG, and ISEC which employed economists along with sociologists, demographers, and political scientists. 

He settled on Colin Clark as his PhD advisor and on the topic of estimating India’s national income. Colin Clark was also Richard Stone’s advisor – whose work on national income, done several years after Rao, was awarded the Nobel Prize in economics in 1984. 

Rao, thoroughly absorbed in the intellectual ferment of this period, was then invited to apply for a faculty position at Cambridge as a Fellow of Gauis and Conville College and was torn between his desire to indulge his interests in academic economics and fulfill his deep desire to return home and contribute to India’s development. He was strongly nudged to return to India by Keynes who seemed quite incensed at his desire to stay on in the UK saying that ​“it would be the greatest mistake in the world” (Keynes’ letter to Lt Col MV Brett, June 21, 1934)². Instead, Keynes believed that Rao should return to India and play a part in India’s economic development. Rao returned to India in 1934 as Principal of the SLD Arts College in Ahmedabad. Keynes’ letter of recommendation for the post said that he had a ​“high opinion of Mr. Rao’s abilities and of his competence in several branches of Economics.” (Keynes’ testimonial for Dr. Rao, September 26, 1934). 

In 1942, Dr. Rao was asked by Sir Maurice Gwyer, the then Vice-Chancellor of the University of Delhi to join the university as its first professor of Economics (Dhar, 2002). Shortly afterwards – in response to the Bengal Famine – he accepted an appointment as Director of the Food Statistics department in the Government of India. He rejoined the University of Delhi in 1946, and in 1947 started thinking about building a school for economics in the fashion of the LSE, believing it would train a cadre of economists who could join the Indian Economic Service – which was also his brainchild. He brought in B.N. Ganguli and P.N. Dhar as faculty. Operating on a shoestring budget, the Delhi School of Economics Society was formally established in 1952. After securing grants for the expansion of the School from the Birlas (INR 6 lakh) and Tatas (INR 1 lakh), the building, library and other facilities were built and the faculty now included luminaries such as K.N. Raj and K.R. Narayanan (the future President of India). When Rao was asked to become Vice Chancellor of the University of Delhi, he decided to give up his Chair in Economics and award it to Amartya Sen as an inducement to bring him to the Delhi School. Soon afterwards, DSE attracted some of the greatest Indian economists of their time including Sen, Manmohan Singh, Jagadish Bhagwati, Sukhamoy Chakravarty,  Dharma Kumar, and Pranab Bardhan, and became the premier institution for economics training and research in the country. Rao was also responsible for establishing the Department of Sociology at the DSE with M.N. Srinivas, and the Faculty for Management Studies (FMS). He resigned as Vice Chancellor of the University of Delhi after three years to focus his attention on the Institute of Economic Growth (IEG) which he had founded in 1952 as an economics think tank with the Brookings Institution as a model.

He joined the Planning Commission in 1963, and in 1966 was invited to join the Congress Party which was looking for intellectuals to fill its ranks. The Chief Minister of Karnataka, S. Nijalingappa, persuaded him to run for election as a member of parliament from the Bellary constituency. He won the election and was appointed as the Union Minister for Transport and Shipping. In his three years in that post, he focused on developing the nation’s public infrastructure and was responsible for reviving the construction of the Mangalore and Thoothukudi (formerly called Tuticorin) ports. He was transferred as Minister of Education in 1969 where he focused on rural primary education and adult literacy. Despite winning the re-election in 1971 with a handsome majority, he was not reappointed to the cabinet – possibly because his argumentative style did not sit well with the PM, Indira Gandhi. He was awarded the Padma Vibhushan in 1974. 

In 1972, he moved to Bengaluru and founded the Institute for Social and Economic Change (ISEC) as an interdisciplinary social science institute. Under his leadership, the institute played a central role in developing the Mandal Panchayat system of the Ramakrishna Hegde government which became the basis for the 73^rd Amendment to the Constitution. Rao also wrote prolifically during this period on subjects ranging from Indian Socialism, revisiting trends in India’s national income, and India’s linguistic integration for which he made several recommendations including simplifying Hindi grammar and bringing in idioms and ideas from other Indian languages, and starting a massive effort to teach basic versions of the major Indian languages in every part of the country. 

V.K.R.V. Rao was a devout Hindu, deeply influenced by the philosophy of Swami Vivekananda that Rao called ​“Vedantic Socialism” which he argued had a lot in common with democratic socialism and Gandhian socialism. Rao was married twice. With his first wife Pramila he had three children – Madhav Rao, also an economist; Sudha Rao, a sociologist of education; and Meera Ramakrishnan, whose daughter Uma and son Mukund are both biologists. Pramila Rao passed away in 1955 from multiple sclerosis. He subsequently married Kamala Achaya, the Vice Principal of Miranda House who had received her PhD in English Literature at Oxford under J.R.R. Tolkien. His nephew S.L. Rao (my father) edited and published his The Partial Memoirs of V K R V Rao but his life merits an in-depth full-length biography. 

About the author

Vijayendra Rao is Lead Economist in the Development Research Group of the World Bank. [Full profile]