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

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Export Subsidy-Dubious Basis

(iii) issue, pre-incorporation, etc, expenses, and (iv) contingencies. The corresponding proportion in 1975-76 had been only 26.3 per cent. The argument that the emerging shortages of items like steel and cement indicate growth of genuine investment demand also needs to be viewed with some caution. Output of both cement and steel increased only marginally in 1978-79. No doubt there have been some imports. Nevertheless it would be useful to examine what proportion of the demand for steel and cement is of a speculative nature, creating artificial scarcities as happened in 1973-75. Further, prices of investment goods have gone up very sharply during the past year. Between May 13, 1978 and May 12, 1979, the wholesale price index for 'machinery and transport equipment' rose by 11,3 per cent, for 'iron and steel and ferro alloys' by 31.5 per cent, and for 'cement, lime and plaster' by 22.6 per cent. So even if investment outlays do show a rise in financial terms, a significant part of the rise would have been accounted for by increased investment cost. The investment demand for such goods as cement and steel cannot, therefore, be as high as the apparent scarcities suggest. If black market premiums have emerged, they do not necessarily indicate higher investment demand; they could as well as be signs of speculative demand.

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