The important contribution of professor Sinha to the history of economy doctrines is his thoughtful and putative views on fiscal policy. In the context of India, he opined his views on the developmental fiscal policy in his famous book ‘Capital and Employment’ (1964) on the page 94 as, "High marginal rates of income tax are still ineffective because of tax evasion on a large scale. Honest men are penalized. Defaulters get off with high dividend ………………. . We must stop caricature of these taxes. They must be made effective sources of revenue. It should be easy to make company taxation simple once personal taxation is made effective on a broad base." These views of Dr. Sinha on the developmental fiscal policy was quoted by the Nobel laureate, Prof. Gunnar Myrdal, in his reputed Nobel prize awarded book ‘Asian Drama’, Volume III on the page 2099. Though out of its three volumes he as referred once, which seemed to be an appearance in the role of a guest artist on the stage of fiscal policy in the Myrdal'’ Drama. Nevertheless it is, indeed, a matter of an academic excellence and pride to late Prof. Sinha, which authorizes the title of eminence as universal acclaim.

According to him………………. Agriculture has largely escaped taxation in this country during the period of development and has amassed wealth through high prices of foodgrains. Emphasis on economic commodity taxes is considered necessary to make rural people pay for development. The fact, however, is that rich people in both agriculture and non-agricultural sectors have been lightly taxed. The regressive character of commodity taxes has accentuated inequalities in the distribution of income. Effective, broad-based direct taxes in both the sectors are the only means to tap the income and wealth, which escape taxation. It should be wrong to formulate taxes to as to farmers in the way the Soviet Union and Japan did. In India contribution in economic development must be based on justice. Finance for development must come from income and wealth commercial, industrial and agriculture. In advanced countries the portion of national income collected in taxes is about 20 per cent. In India it is 10 per cent only. It was 7 per cent in beginning of the First Plan, 8 per cent at the end of the Second Plan and is expected to be 11 per cent at the end of the Third Plan. The rate of increase has been slow for the exchequer and yet painful for the taxpayers because of this defective tax structure. When the tax system is made progressive and related to the levers of economic growth, it would be easy to raise an increasing portion of the national income in taxation. The recent buoyancy in revenues are more apparent than real. It is caused by soaring prices. The house must be put in order to stop erosion of accounting and exchange medium. With rise in efficiency through plans, the nation should have capacity and willingness to contribute ever-large portion of income to the exchequer for its prosperity (Capital & Employment 1964, p. 95)’.

He suggested that the triple-tax fiscal policy along with an active monetary policy would maintain mechanism of resource allocation and keep the economy on optimum-equilibrium growth path.

When we make a minute assessment of Dr. Lakshminarayan’s opinions on the functional approach of fiscal policy, we find that they are correct and quite relevant today. His prediction on economic events to be happened in near future has been so accurate and real that nobody can challenge the relevancy of his economic thought as present day’s economic circumstances. Several commissions and committees were set up since then for the rationalization of direct and indirect taxes in India. The long Term Fiscal Policy was initiated in 1985 by Late Rajiv Gandhi, the then Prime Minister of India, to restructure the fiscal segment of our economy. The setting-up of the Chakravarty Committee in 1985 and the Narshimham Committee in 1991 under our efforts of policy prescriptions of structural adjustment of the India economy started by the former Finance Minister, Dr. Manmohan Singh, in the democratic captaincy of Narsimha Rao are, of late, the best examples and direct offshoots of his forecast of economic ideas on the said subject matter. The cut in subsidy on the several agricultural inputs and outputs may be another examples of his economic foresight. In this way, there is no exaggeration to state that Late Dr. Sinha was a great astrologer of the economic science.

Having impressed by his foresight in the field of rationalization of India tax structure Prof. Myrdal referred this view of late Sinha on the functional approach of fiscal policy as the Director of the famous Asian Drama.

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