This refers to “Policies & the public interest” by Shyam Ponappa (October 4). When taxes are reduced or made zero, the real effective value of the product nears or matches its intrinsic value. This enables the product to be competitive in the international market in terms of price. When quality is also assured, we shall rule the global market gaining foreign exchange required to meet the import bills of things we are unable to produce like crude oil etc.
As rightly pointed out by Ponappa, volume matters. As the level of production rises in geometrical progression, the quantum of tax collection also grows though the rates are low. But while developing infrastructure as required, agriculture should not be forgotten. It is a strange paradox that we speak a lot about the cow but not much about the milk or the cattle breeder.
A reduction in the policy rate may, in the short run, result in inflation. We can also read it as availability of liquidity. In the long run, it yields results. When the cost of capital investment is less, large investments will take place. Overall, the economy matures enough to take care of the public interest.
P D Sankaranarayanan Gurugram
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