Economic Ideas of K.T. Shah

The following points highlight the top seven economic ideas of K.T. Shah. The economic ideas are: 1. Indian Finance 2. Trade, Tariffs and Transport 3. Municipal Government and Municipal Finance 4. Federal Finance 5. Economic Planning 6. Economics in Ancient India 7. Payment for War.

Economic Idea # 1. Indian Finance:

Shah points out that during 1919 to 1958 land revenue had declined from Rs. 35 crores to Rs. 20 crores. He suggested the abolition of drink traffic and minimisation of military expenditure and home charges. The loss in income should be made good by direct taxes.

Economic Idea # 2. Trade, Tariffs and Transport:

Shah considered transport facilities and tariff regulations were indispensable for the development of international trade. He was in favour of protection, though he was aware of its limitations also. He gave a scheme for adopting protectionist legislation for India. He pointed out that the scientific protection formulated by List and J.S. Mill was only a temporary fiscal aid given to selected industries.

Economic Idea # 3. Municipal Government and Municipal Finance:

Shah favoured both nationalism and democracy—nationalism to achieve brotherhood and democracy to save people. He advocated the revival of local self-government. He felt that the municipal government is a necessity as industries had developed in cities and towns. He also suggested that the local character of municipal finances should be maintained and items of revenue and expenditure should be re-classified. The entire revenue system should be modified.

He gave the following ways by which the revenue system could be changed:

(1) Taxes should be reduced to the minimum.

(2) Indirect taxes viz., octroi and town duties should be abolished.

(3) To compensate the loss the rate of direct taxes should be raised proportionately.

(4) Taxes should be realised only when the municipal trading enterprise falls.

Economic Idea # 4. Federal Finance:

Shah pointed out that in India, federal principles had been hardly recognised though finances had been decentralised. After examining the financial evolution in India, financial position of the Government of India and financial relation between the Government of India and the Indian states, he gave his own suggestions. In the opinion of Shah, financial resources and obligations should be divided among the various states according to the division of powers and duties.

Regarding the evolution of federal finance, he pointed out three things:

1. There was no logical division of resources and obligations.

2. The division already adopted was not in accordance with the well-coordinated and scientific principle of federal finance; and

3. Indian states could no longer be left out.

Shah pointed out that a tripartite arrangement between the Government of India, British Provinces and Indian states should be evolved. In order to govern the country more economically, there was room for retrenchment and readjustment in public expenditure. This was necessary for the promotion of economic welfare also.

He also suggested a reduction in defence expenditure and an increase in expenditure on health and education. The central government should give grants to provincial governments and the basis of income tax should be changed.

Economic Idea # 5. Economic Planning:

As Shah had acted as the Honorary General Secretary of the National Planning Committee he was very much interested in the development of planning. He wrote two books on Principles of Planning and India’s National Plan.

Principles of Planning deals with the objectives of planning, production, forms of production, industries, labour and population, distribution, trade and administrative organisation and public finance. The second book examines more fully the administrative organisation.

Planning meant a simultaneous advance on all points and in all sectors— economic, cultural and spiritual values and the human side of life. The aim of planning was the attainment of national self-sufficiency and the doubling of the standard of living of the masses within a period of ten years. Therefore the National Planning Authority should scientifically distribute industries and systematically organise resources in every state. He also suggested that the administration should be decentralised, and agency of that authority should be instituted in every state.

Economic Idea # 6. Economics in Ancient India:

In his work on ‘Ancient Foundations of Economics in India’, he showed that the economic ideas of Indian servants thousands of years ago were similar to modern economic ideas. He believed that all allied branches of social science, namely, economics, ethics and politics were interdependent.

Agriculture and animal husbandry were the main occupations of people in those days. Material wealth was not an end in itself. He had discussed the organisation of production, socio-economic institutions, regulation governing the distribution and consumption of wealth, trade, currency, credit, taxation, its basis and justification and the role of state in production and distribution.

Economic Idea # 7. Payment for War:

In his “How India Pays for the War” Shah discussed the ways by which India paid for the Second World War. India had to pay for the war by direct and indirect taxation, tax on transport and communications and through currency receipts. Indirect taxes included customs duties on imports and exports, central excise, salt duty, and direct taxes included income tax, corporation tax, super tax, cess, profits tax and investment in war loans.