Wednesday, April 04, 2007

Value added tax : the cause of the current inflationary pressure?

Almost two years ago, when India was extensively debating the pros and cons of implementing a value added tax system, spiralling prices were one of the concerns that the opposition and the left aired against the proposed system. Many policy makers and academics who favoured VAT chose to argue that the system that is an effective alternative to the cascading effect of the present taxation policies, will lead to a decline in general prices while also saying that prices may increase in the short run, before the system fully falls in place.

Is it the short run price rise that academics had forseen that is leading to a rise in general prices?

Kindly leave your comment on what you think.
This post shall be updated with your responses.