ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Indirect Taxes, Prices and Investment-Some Aspects

Some Aspects G Narayanan The argument that a general reduction in the level of indirect taxes will help to reduce prices and costs is valid only if it is assumed that there is an equivalent decrease in government expenditure. But given the need to finance pre-determined amounts of government expenditure, commodity taxes are certainly less inflationary than the alternative of deficit financing. The shift of resources to the Government achieved by a budgetary deficit is not permanent in the sense thai the deficit, and the consequent inflationary impulses, will have to be repeated year after year to finance a given monetary expenditure by the govern- ment, whereas in the case of a commodity tax {or any other tax) the shift of resources to government is permanent.

Bank Deposits in the Indian Economy-A Comment

A Comment G Narayanan August 1967), V G Pendharkar does not consider the impact of expansion of deposits with the non-banking sector on the growth of bank deposits. He does not see any possibility of growth of bank deposits being adversely affected since he holds that deposits initially diverted from banks to non-banks would find their way back to the banking system and remain there, Actually, given the general scarcity of loanable funds and Reserve Bank restrictions on lending by commercial banks, there is a natural tendency for interest rates to rise in the uncontrolled sector and this does cut into the expansion of bank deposits.

The Inflationary Years

November 25, 1967 organisation of large industry and business in the country is difficult to appreciate. The "mutual advantage'' to be gained from the development of an organic relationship between large and small industries includes, for the large units, spreading out of risks, reduced investment in manufacturing facilities, smaller working capital requirements, and lower unit cost of product because of lower overheads of small units. In return the large units have the obligations, which they fulfil in most developed countries, of providing assistance by way of making available drawings, technical supervision, help in testing and finishing, and procurement of specified qualities of raw materials. FICCI would be rendering better service to its own membership by educating it in the economics of actively developing small units as ancillaries, than by complaining about official attempts to impose conditions on large-scale units about purchases, etc, from small-scale units.

Shifting of Tax by Companies-A Comment

A Comment G Narayanan AS a pioneering attempt in a relatively new field Lall's study ('Economic and Political Weekly', May 6, 1967) is highly interesting. I however wonder whether the results have not been somewhat influenced by the choice of periods, which does not appear to be based on any other consideration than that they coincide with the plans.

Corporate Taxation in India-Some Aspects

Some Aspects G Narayanan Liberal investment allowances, as allowed under our system of corporate taxation, combined with high marginal tax rates go to subsidise non-profitable investment. Besides, tax subsidies relat- ed to the cost of equipment also distort the choice of techniques by companies. Finally, it is the established company with taxable income from its existing operations which gets the full benefit of investment allowances, whereas a new company which has a long gestation period may have to wait for many years before tax relief becomes effective.
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