w w w . s e e ci n f o . i n
3 power in the hands of the community, have been in operation for some time while thean round fall in production, both industrial and agricultural, was of more recent origin.I stressed then the need for increasing production in every possible way and I gavedetails of the steps taken to promote the Increase of textile production as an example of what the Government are striving to do. But the House must realise that any substantialincrease in production is impossible until the shortage of materials, the bottleneck intransport and other impediments are removed. If the increase in production requires theImport of equipment from overseas, this again takes time to obtain and is also limited by considerations of foreign exchange on which the more urgent requirements of foodhave necessarily the first claim. These difficulties are inherent in the situation but itdoes not necessarily follow that Government are doing nothing in the matter. One serioushindrance in the way of production, even with the available resources, has been thefrequent disputes between capital and labour, resulting in strikes and other interruptionsof work. If the recent truce agreed upon between capital and labour for a period of threeyears in the recent Industries Conference can be implemented in letter and spirit, theway would be clear for a considerable increase in production.6.A view that has in recent years become almost unanimous among economistsand financiers is that each year a Government’s financial policy should be so plannedas to rectify the economic maladjustments of the time, and to serve as a compensatorydevice to offset fluctuations in the private sector of economy. In a time of inflation, budgets should not only be balanced but there should he a comfortable surplus for mopping up the excess purchasing power and encourage economy in private spending.On the other hand, when a depression is on, Government should launch bold schemesof public expenditure and should boldly budget for a deficit if necessary.7.An inflationary pressure resulting from too much money chasing too fewgoods has been the keynote of our present economy, and there is no indication that areversal of this trend is in sight. At such a juncture, we should exert every nerve to budget for a surplus, if possible, by increasing revenue and curtailing expenditure. Themethods by which these aims are achieved are important, because as the present phaseof inflation is due to an abundance of spending power without the goods to spend on,we must see that a surplus is achieved in such a way as to curtail spending and createsuitable incentives for increasing production. In other words, the tax-burdens laid must be met by cutting down expenditure on consumption and not by saying less. Similarly,the borrowing made must be from genuine savings and not from inflated bank credit.The practical application of these principles is indeed difficult, but we must bear themin mind in shaping our financial policy.
BALANCE OF PAYMENTS
8.I should like to draw the attention of the House to a matter which has been causingsome concern to Government, namely, the emergence, in recent times, of a substantialadverse balance in India’s external payments. India’s balance of trade has in the pastalways been substantially in her favour, the surplus of exports over imports being used