Former Reserve Bank of India (RBI) governor Raghuram Rajan waded into the wealth redistribution tax debate dominating homes across India. Speaking at an event at the Kellogg School of Management – Northwestern University, Rajan said having inclusive growth will increase the pace of growth, but taxing the wealthy is not the solution to achieve the same.
“We need to try and elevate rather than bringing the successful down,” Rajan said.
Indian Overseas Congress chairman Sam Pitroda’s remark that the inheritance tax in the US was an idea that could be debated and discussed in India too snowballed into a controversy with the BJP stating that the Congress would redistribute the wealth of Indians if it was voted to power.
The Congress has steered clear of Pitroda’s remarks, saying its manifesto or Nyay Patra for the Lok Sabha elections did not anywhere mentioned wealth redistribution. The grand old party’s manifesto or Nyay Patra mentions income inequality, India’s wealth, people belonging to economically weaker sections, and the allocation of government-owned land and resources.
“I’m not the opposition. I like to emphasise that and I’m an academic, and academics have a duty to criticise what? They don’t see us working well, both sides, right? So that’s what I do. Uh, look, I think we need to figure out how we get the people who are not doing well to actually do better and that will increase growth. Having inclusive growth will actually increase the pace of growth. And I’m not saying we should, you know, tax the wealthy to a huge extent or anything of that sort,” Rajan said.
He further said that there needs to be thorough examination of the parts of the economy that have not benefitted or have suffered a K-shaped recovery. He added that the first cost of not utilising these parts of the economy is wasted resources such as the lack of contribution of mines to India’s growth story. While emphasising the wastage of resources, Rajan said that the bigger consequence of this is more social conflict.
“But I think we need to examine how we can get the part of the economy, which is not benefitting right now, which has suffered a K-shaped recovery. You can’t deny that when you look at the numbers since the pandemic, how do we get them flourishing? Because the cost of not doing that is first wasted resources. We have so many mines which are not contributing to India’s growth, but more important is it could lead to more social conflict,” he said.
Rajan mentioned that what is happening in India is not a fight between two communities as is being represented. Rajan claimed that it is a fight for jobs and reservations as it is perceived that one community is getting more than the other.
“It’s also a fight for jobs for reservations because one community is seen as getting more of that than the other. If we have joblessness of the kind we’ve seen, we lose that population, that demographic dividend we’ve been talking about. But it becomes a demographic curse, much more fighting about the pie rather than growing the pie. So, we absolutely need to work on that. And I would say let’s try and elevate rather than bring the successful down,” the former RBI governor said.
