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

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The Resources Picture

The Resources Picture Rajiv THE tax effort of the Central Government has considerably flagged in the last two or three years, the ratio of Union taxes to national income declining from 10 per cent in 1965-66 to 8.7 per cent in 1968-69. The tax effort this year is likely to lead to only a marginal increase in the ratio to around 9 per cent. The favourable experience of the last year has led to renewed optimism as to the feasibility of "safe"' deficit financing; past experience suggests that the impact of deficit financing in any year on prices is limited to the increase in national product (and not its absolute level) in the previous year. Thus the 9 per cent increase in national output in 1967-68, which ensured greater market supplies in 1968-69, was responsible for the absence of price increase last year. In 1968-69 national income rose by just 3 per cent and the fresh bout of deficit financing this year would in all probability lead to a price increase of 3-4 per cent in 1969-70.

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