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

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A K DAS GUPTA's article on Differential Rates of Interest (July 1) seems to be a ease of misplaced sophistication. There are, besides, a few statements in the piece which deserve to be contested. To take the opening obiter dictum: "Redistribution of income is the direct responsibility of the State. The legitimate instruments of such redistribution are taxes and subsidies. It is unwise to relegate the function to public undertakings whose efficiency has to be tested by either criteria such as volume of output and the rate of profit on capital invested," By implication, Das Gupta would rule out the use of monetary policy for serving the goals of re- distributive policy. But does such a point of view make any economic sense, particularly now that more than one- third of a century has elapsed since the publication of Keynes "General Theory"? Taxes and subsidies allocate and reallocate purchasing power. Monetary measures similarly aim at allocating and reallocating purchasing power. Qualitatively, there can be no distinction at all between purchasing power created through the fiscal apparatus and purchasing power created via the monetary .system. In fact, in the Indian context, where aggregate bank advances even exceed the annual fiscal outlay of the Central Government, to desist from using the monetary instruments for the furtherance of distributive objectives would be, it can be suggested, tantamount to a dereliction of duty on the part of the State. The very rationale of nationalising the banking system, I am afraid, would collapse if Das Gupta's prehistoric notions were to be respected.

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