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Sunday, May 19, 2024, 4:43 am

Sunday, May 19, 2024, 4:43 am

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Focus on wealth creation rather than poverty distribution.

wealth creation
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The election was turning out to be boring. This is most likely the explanation for low turnout in the first two phases of polling. Sam Pitroda, Rajiv Gandhi’s old friend and son Rahul’s tutor and escort during international tours, has added excitement to the polls. The Prime Minister is accusing the Congress Party of attempting to take Indian property and distribute it to others.
The sheer fury of Modi’s offensive put the main opposition into a defensive posture. He criticised the Congress by using the tagline “jindgi ke saath bhi, jindgi ke baad bhi” from a LIC advertisement. The allusion was to Pitroda’s proposal for an inheritance tax. Rahul Gandhi’s comments about “an x-ray” of people’s wealth, a socio-economic survey, and a caste study have fueled the dispute. The Congress platform aimed to address growing inequality of wealth and income through policy improvements. This could support speculation of an inheritance tax.

Pitroda and Rahul were unaware that India’s inheritance and estate taxes were repealed in 1985 by the Rajiv Gandhi government.
The deceased’s estate contained both immovable and moveable assets. The bona-fide inheritors were responsible for paying the estate tax, which reached 85% at its peak. In no other low-income country has inheritance tax been effective in reducing wealth disparities. During Indira Gandhi’s first few years, income and wealth taxes combined exceeded 100%. Yes, more than 100 percent. Expropriatory taxation led to the emergence of black money, which wealthy individuals kept in hidden Swiss accounts.

After high taxation and the license-quota-permit system failed to address economic inequality and poverty, market reforms were implemented. The immediate cause was a foreign exchange crisis that led India to pawn its reserved gold with the Bank of England. Economic liberalisation led to faster growth and increased the number of impoverished people out of poverty. The economy grew at 7-8% per year. The Pitroda-Rahul pair’s proposal is therefore a surefire formula for economic catastrophe. Reversing the trend of economic progress at a time when foreign investment in projects and equity markets is increasing, when Indian entrepreneurship is manifesting itself in new start-ups, and when globally recognised brands like Apple phones, Tesla electric cars, and smartphone chip manufacturers are growing their presence in India. The nation suffers greatly from such outdated notions.

Rahul is living in a fantasy world if he thinks he will win over the poor by proposing measures like an inheritance tax and wealth redistribution. No longer are the poor credulous. With the promises of “garibi hatao” and “Samajwad,” they became discouraged. In the early decades following independence, their fathers and grandfathers had placed their trust in these mantras, only to be disappointed. The wealthy did get richer while the poor went poorer during the height of “samajwad.” The impoverished in 2024 likewise want a decent existence in an open market economy that provides equal opportunity to those who can take advantage of it. Their fundamental needs—such as food, shelter, clean water to drink, basic healthcare, free public schooling, etc.—are provided by a number of federal and state social programmes in a liberalised economy. Due to the nation’s adoption of a growth rate that is higher than the Hindu average of 3.5–4%, it is possible to conclude that socialism did not provide even a fifth of the welfare benefits that governments have been able to provide. India’s future lies not in poverty redistribution and inheritance taxes, but in faster growth.

ABHISHEK VERMA

 

 

 

 

 


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