He was 94 and died of age-related problems.
A professor of Economics in Delhi University for many years, Dhar was one of the founders of the Delhi School of Economics.
He served as the United Nations Assistant Secretary General, Research and Policy Analysis, in New York from 1976 to 1978.
Dhar, who was the only person in the Prime Minister's Office those days who was not from either the IAS or the IFS, had joined the PMO in 1970.
He was with Indira Gandhi in Shimla when the famous Shimla Accord was signed with the late Zulfikar Ali Bhutto after 1971 war with Pakistan.
Dhar, whose wife Sheila was a well known singer writer, was awarded the Padma Bhushan, India's highest civilian award in 2008.
His memoir 'Indira Gandhi, the Emergency, and Indian Democracy' is considered an authoritative documentation of events of the important period in modern India's history.