Maximum rate of income tax 25 percent. British economist Nicholas Kaldor advises steeply progressive tax rates. Swedish economist Gunnar Myrdal recommends a “hard” government, which is effective and strong in tax collection.
The highest marginal rate on unearned income reaches 88.25 percent, on earned income 82.5 percent.
Eleven tax brackets introduced, with rates from 10 to 85 per cent. The top marginal rate is effectively 97.75. The rates were similarly confiscatory in Pakistan, Sri Lanka and Bangladesh.
Poverty becomes severe. The rupee suffers from inflation. India's work force is pushed into the confiscatory tax brackets. The distress causes civil disorder. In March 1975, prime minister Indira Gandhi suspended democratic rule and civil liberties.
The "Nehruvian Socialist rate of growth" is used to refer to the low annual growth rate of the economy of India before 1991. It stagnated at around 3.5% from 1950s to 1980s, while per capita income growth averaged extremely low 1.3% a year. At the same time, South Korea grew by 10% and Taiwan by 12%. This phenomenon was called the “Hindu rate of growth”, by the leading Indian economist Raj Krishna.