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Raja Chelliah (1922-2009)

A tribute to Raja Chelliah, the public finance expert who also built two institutions in New Delhi and Chennai, and who died in early April.


Raja Chelliah (1922-2009)

Indira Rajaraman

The minister prevailed upon Chelliah to return to India, so that his advice would be readily available on tap for the reform of what was surely one of the most tangled tax structures the world has

A tribute to Raja Chelliah, the public finance expert who also built two institutions in New Delhi and Chennai, and who died in early April.

Indira Rajaraman (indira_raja@ is professor emeritus at the National Institute of Public Finance and Policy, New Delhi.

aja Chelliah passed away on 7 April 2009 in Chennai, at the age of 86. The two institutions he founded, the National Institute of Public Finance and Policy (NIPFP) in Delhi in 1976, and the Madras School of Economics in 1995 (when Chennai was still called Madras), have endured and thrived. His name b ecame synonymous with tax reform with his chairing of the Tax Reforms Committee set up by Finance Minister Manmohan Singh in 1991, to design the fiscal plank of the structural reform of the Indian economy begun that year. But his association with tax reform in India was a long and continuing one which went back much further, to the early 1970s.

The direct tax structure at that time was steeply progressive, but did not yield much revenue. The country had just come out of the agricultural crisis of the 1960s under the stewardship of C Subramaniam, who held the agriculture portfolio in the union cabinet at the time, and gave the Green Revolution the political direction and support without which no reform is possible. Prime Minister Indira Gandhi then switched the attention of her most able minister to the nagging problem of revenue stagnation. This process began much before his formal assumption of the finance portfolio in 1975. He, in turn, used the same formula that had worked so well for agriculture. He looked for the best technocrats in the business.

Raja Chelliah was then in Washington, in the Fiscal Affairs Department of the International Monetary Fund (IMF). That was a time when the IMF enjoyed an unassailed reputation. The Fiscal Affairs Department in particular was known as a dispenser of reliable advice to developing countries. Quite independently of his position as Chief of the Tax Policy Analysis Division within that department, Raja Chelliah was widely known in India for his book, Fiscal Policy in Underdeveloped Countries, a lucid college-level text. He was a natural choice for the finance minister to turn to.

june 6, 2009

ever known. Leaving Washington must have been something of a wrench, in particular for Mrs Chelliah who shyly vouchsafed to me that she enjoyed her stay there, but the pull of the home country proved too strong to resist. Raja Chelliah wisely negotiated an independent platform from where he could function without being locked into the hierarchies within the Finance Mini stry. The NIPFP was born in 1976, with Raja Chelliah as its founder director.

Raja Chelliah, a public finance expert, paid close attention to the funding of all his institutional initiatives. The NIPFP was publicly funded through a memorandum of understanding with the Ministry of Finance, whereby a specified list of faculty and staff positions was covered by an a nnual grant. Raja Chelliah also persuaded many states to make annual contributions of Rs 1 lakh each. These contributions were not underpinned by any formal under standing and, despite energetic a nnual pursuit, gradually wilted away a fter a time. But in the initial years, the broad-based funding pattern served to establish the federal character and mission of the institute, and provided the funding space within which the institute was able to conduct independent research. The M adras School of Economics, on the other hand, was founded on the basis of corporate and other private contributions towards a corpus, with only a land gift from the state government. In a variable interest rate regime, the income yielded by the corpus varied over time, and as a teaching institution where the time of the faculty was not fully available for externally funded research, it remained a source of financial worry to its founder for some years.

Institution Builder

As an institution builder, Raja Chelliah had three key attributes that contributed towards his enviable success. The first was his refusal to accept the judgments of

o thers about the professional worth and ability of any individual. He formed his

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own opinion, based on a careful reading of their writings. In this manner, he became an independent point of evaluation in a profession which, like many others in India, was marked by ethnic spheres of influence, and dominated by a few powerful opinion makers. He trawled through journals to identify working researchers in his fields of interest. In my own case, I met him for the first time in 1988, when as Member of the Planning Commission, he invited me from the Indian Institute of Management Bangalore where I taught at the time, to one of the Eighth Plan Working Groups after having read one of my papers. Teresa Ter-Minassian, who headed the Fiscal Affairs Department of the IMF for many years until recently, remembers him warmly as the person who hired her in the department, at a time when women were not in general made to feel very welcome in the Bretton Woods institutions.

A second attribute was that he worked very hard himself, and drove his colleagues by his own example to produce a steady stream of in-house research. He was emphatically opposed to turning his institutions into academic intermediaries, with work outsourced to people outside. He insisted that only those research grants be accepted whose execution was possible with talent available within the institution.

A third attribute was that he was altogether devoid of the arrogance of rank. His door was open to all. He believed deeply in education as an equaliser, and took a keen interest in the schooling of the children of staff in his institutions. This, in turn, built up staff sense of membership in a team.

Notwithstanding educational support from the church, his childhood was fraught with financial difficulties. His father died young, leaving debts to settle. After completing his schooling, Raja Chelliah worked for a time as a teacher with the military to pay back those debts, before resuming his education at Madras Christian College. His personal chrono logy was therefore somewhat delayed relative to the norm. When he took up his first job in India at the National Council of Applied Economic Research in 1958, immediately after receiving his PhD degree from the University of Pittsburgh, he was

35. He moved on to faculty positions in Rajasthan and Osmania Universities, before leaving the country for the IMF. That he was at no time engaged by the Delhi School of Economics, the premier economics centre of teaching and research at the time, is a commentary on the priorities within the discipline. Fiscal policy was not considered a frontier area of research. The welfare distortions of taxation might have been deserving of classroom treatment, but the mess of realworld taxation structures, of how these might be nudged towards greater rationality if not optima lity, the incentives underlying the pattern, the political economy pressures, none of these issues was seen as deserving of academic pursuit. Fiscal policy became academically respectable in the early 1970s with the work of Peter Diamond and James Mirrlees. But by then, Raja Chelliah had already left the country for the IMF.

Raja Chelliah read all papers submitted to him for comments by his faculty with immense care, down to the footnotes, and his ability to spot errors was legendary. In this manner, by giving generously of his time and attention, he earned the gratitude and affection of all those who worked in his institutions. He valued rigour in empirical work, and as a master of English prose himself, appreciated good writing by others. At the same time, if he disagreed with the thrust of a paper, he could express his opposition with great vehemence, sometimes bordering on the explosive. In a few cases, his rejection of a stand or a point of view grew into a rejection of the author of that stand or point of view, but after a suitable interval, he usually stood ready to accord his customary jovial reception even to a prodigal child. Even so, the fear of r ejection served to suppress dissent to an un fortunate degree.

He carried his fiscal reform mission forward when he moved on from the directorship of NIPFP to membership of the Planning and Ninth Finance Commissions. He returned to NIPFP as Chairman of the Board. When I joined NIPFP in 1994, at the start of his last four-year term as Chairman of NIPFP, he was warm and welcoming, and went to great lengths to settle me in the institute. He wished me to take up the post of Director of the Madras School of Economics in 1999, an invitation I was unable to accept for family reasons. This displeased him, and as usual, he did not suppress his displeasure. But in a spirit of Christian forgiveness, he continued to respond with cards at the turn of each year, personally signed despite the arthritis that made it painful for him to write.

I last saw him at the felicitation ceremony organised at Delhi by NIPFP on his receipt of the Padma Vibhushan in 2008. It was a joyous event, with recollections of many of his former colleagues about his impact on their lives, his ebullience, his sense of humour, and his devotion to work. My own favourite memory of him is of a day when I happened to go into his office to hand in a paper I had just written, for his comments. It was late June, and a completed tax return form was on his table. He was writing out a cheque, and after signing it, put down his pen and looked up. “Rendering unto Caesar what is Caesar’s” he said, and laughed uproariously.

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Economic & Political Weekly

june 6, 2009 vol xliv no 23

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