Influence of interest rates in economy

Reply Fri 16 Aug, 2013 02:34 pm
Hi! I am out of field of finance, but I would like to make my self clear about a quote from a text regarding finances:

" The budget for the year had hit hard the Mutual Funds when the rate of taxation on dividends paid by debt-orientated Funds was raised from 11% to 22%. The dividends payable from Equity schemes were exempt. As a result the debt-oriented Funds were affected adversely and the result was a shift from debt schemes to equity schemes. Realizing the mistake.... bla bla bla"

So can anyone tell me what was the mistake ? and how raising the interest rate can be negative to the economy ?
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