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What Raghuram Rajan said on Wealth Redistribution in India


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Former Reserve Bank of India (RBI) governor Raghuram Rajan recently shared his perspective on the wealth redistribution tax debate in India. Speaking at an event at the Kellogg School of Management – Northwestern University, Rajan emphasized the importance of inclusive growth for accelerating economic progress. However, he stated that taxing the wealthy is not the solution to achieve this objective. Instead, Rajan suggested that efforts should focus on uplifting those who are not doing well economically.

Rajan expressed his disagreement with Indian Overseas Congress chairman Sam Pitroda’s suggestion to consider implementing an inheritance tax in India. This remark sparked controversy, with the BJP claiming that the Congress party would redistribute the wealth of Indians if it came into power. In response, the Congress clarified that its manifesto for the Lok Sabha elections did not mention wealth redistribution explicitly. However, the manifesto did address issues such as income inequality, the well-being of economically weaker sections, and the allocation of government-owned land and resources.

As an academic, Rajan believed it was his duty to critically examine the functioning of the economy. He stressed the need to address the segments of the economy that have not experienced significant benefits or have suffered a K-shaped recovery. Not utilizing these parts of the economy leads to wasted resources and, more importantly, increases social conflict. Rajan highlighted the importance of finding ways to empower these sectors to contribute to India’s growth.

Furthermore, Rajan discussed the ethnic strife in Manipur and clarified that it is not merely a fight between two communities. He pointed out that the conflict is primarily driven by the struggle for jobs and reservations, with one community perceiving an imbalance in opportunity allocation. Rajan emphasized the significance of addressing unemployment to prevent the loss of the demographic dividend India possesses. Rather than focusing on fighting for a larger share of the pie, he advocated for efforts to uplift all communities and promote inclusive growth.

Overall, Rajan’s remarks emphasized the need for inclusive growth, the examination of underperforming sectors, and the importance of addressing social conflict arising from economic disparities. He encouraged a focus on uplifting those who are struggling rather than bringing the successful down through excessive taxation.

Raghuram Govind Rajan (born 3 February 1963) is an Indian economist and the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business. From September 2013 through September 2016 he was the 23rd Governor of the Reserve Bank of India.

One Comment

  1. Sam Pitroda has started an illogical and untimely controversy by giving a statement on the subject of inheritance tax during the Lok Sabha elections of India, which has no justification in a country like India where almost 70% of the people live in villages.

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