TBAs Not Irrelevant

model by making government draw a part the surplus2 of the M sector (the profit income) in the form of import tariff revenue. This facilitates government investment and capital formation and consequent growth. But if one observes the experience during the last 45 years of protectionist policies, it appears that a major part of surplus for government investment appears to have come mostly from the unorganised manufacturing and agricultural sectors which employ a major section of the poor, instead of the protected sector Major part of government expenditure is drawn from its revenue through highly regressive indirect taxes and deficit financing. Government investment through deficit financing, if it causes inflation, makes the poor take the major part of the burden. Therefore, the burden of government expenditure might have been borne mostly by the poor but not by the organised manufacturing sector. The overvalued exchange rate suppressed agricultural prices and also other exportable goods' prices which implies that these sectors subsidised the urban consumption. In other words, agricultural sector and government expenditure made feasible by indirect taxes and deficit financing might have kept subsidising the organised manufacturing sector.