[Letter to Mr Minoo Masani]

Summary

In this letter of 20 June 1966, B. R. Shenoy writes to M. R. Masani about a draft concerning export duties and encloses revised text for Masani’s use. Shenoy says he has also sent a statement on devaluation, and explains that his suggested placement of the export-duty paragraph reflects his view of its importance to the corrective mechanism of devaluation.

The attached text argues that the benefits of devaluation will be largely neutralized by export duties and that the resulting 10–15 per cent de facto adjustment is insufficient to expand exports. It therefore calls for the abolition of export duties introduced with devaluation. The accompanying policy recommendations extend beyond trade: anti-inflationary discipline, reductions in non-developmental public expenditure, limits on foreign borrowing, postponement of costly capital projects, tax reduction, and dismantling permits, licences, exchange controls, and import licensing. Transitional measures are proposed for exporters and stranded industrial projects, while import duties and surcharges on raw materials, fuels, and spare parts are to be abolished.

Key points

• Shenoy returns a draft to Masani with marginal suggestions and discusses the placement of a paragraph on export duties.
• The attached argument holds that export duties largely neutralize the benefits of the 1966 devaluation.
• The text estimates the de facto devaluation at 57.5 per cent but says the effective adjustment may be only 10–15 per cent.
• It calls for the urgent abolition of export duties introduced alongside devaluation.
• It recommends anti-inflationary policy, fiscal discipline, reduced non-developmental spending, and restrictions on foreign borrowing.
• It advocates postponing the Fourth Plan and dropping the proposed Bokaro Steel project, described as exceptionally costly and wasteful.
• It proposes tax reductions and the dismantling of permits, licences, exchange controls, and import licensing.
• It calls for temporary support for exporters and stranded industrial projects, alongside abolition of duties on imported inputs.