INTRODUCTION

The Classical theory of economic policy was never wholly averse to state intervention in economic affairs: indeed the state had to play a significant part in bringing about socioeconomic changes, so that rapid economic development was made possible. Whereas James Mill thought that such changes could be rapidly introduced by legislation, the Court of Directors before his arrival at the India Office thought that the process of preparing Indians to make them enjoy the pleasures of free trade was a slow and gradual affair. The Directors also came to the view that the public sector had a definite function to perform from a different point of view. In order to defend public expenditure on the provision of what are called public goods by modern economists, the Court even criticised Adam Smith and Quesnay for making the unrealistic distinction between productive and unproductive labour.