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Location Based Tax Incentive and its Role in Economic Growth: Himachal Pradesh (India)

Mohd Zulkarnain Sikandar and Madhurima Lall

Research Scholar, Department of Applied Economics, University of Lucknow, Lucknow, INDIA. Professor, Department of Applied Economics, University of Lucknow, Lucknow, INDIA.

ABSTRACT

In this paper author studies the impact of Tax Incentive scheme provided by the Central Govt. to the State Govt. for the economic development of hilly states which are not able to join the race of socio-economic development of the country. The tax holiday was provided to Himachal Pradesh for initial period of ten years from 2003 till 2013.The study uses Panel data for the study and find there is a large increase in employment, total output, fixed capital, the number of firms and total amount invested as a result of the scheme. The author has used data to study the impact of tax incentive on treated state and controlled neighbouring states. The study shows that new firms entering the treated state are larger and more productive and therefore there is increase in the GSDP.

Keywords :Economic Development, GSDP, Tax Incentive, Employment, Output, Fixed Capital.