"Whenever I see homeless people on the street begging I feel it is not only morally wrong but also practically wrong.
"We have to think seriously how to reduce this gap between the rich and the poor," he said addressing the audience at Ummeed Aman Ghar, an organisation working for homeless women and children.
The Nobel Peace laureate said the economic inequality in big cities makes him "uncomfortable".
"In cities like Mumbai and Delhi there are huge buildings housing millionaires and billionaires who lead luxury lives. In Mumbai, the hotel where I was staying in I could see homeless people nearby and it made me really uncomfortable," he said.
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"Don't be discouraged or demoralised. Be optimistic and have confidence in yourselves. We came to India 54 years ago and now our community is thriving here because of courage and self-determination," he said.
The Dalai Lama referred to himself as a Marxist.
"As far as socio-economic theory is concerned I am a Marxist. I am attracted to the principle of equal distribution. The poor and helpless need more care. While capitalism is only about minting money," he said.
He also stressed upon the need to keep a human spirit and said that passing through a difficult time makes you more realistic.
There would be no basis for war or exploitation in the world if people would develop a sense of "oneness" and consider others as a part of themselves, he said.
"I was once homeless too. But other people took care of me. Take the world as your home and grow a sense of community," he said.