 "Raghuram Rajan")
Raghuram Rajan, the former Reserve Bank of India (RBI) governor, said that having inclusive growth is pivotal for accelerating economic progress. However, he opposed the idea of taxing the rich as a means to achieve this goal.
"We need to try and elevate rather than bring the successful down," Rajan said at an event at the Kellogg School of Management - Northwestern University.
His remarks come amidst a backdrop where Indian Overseas Congress chairman, Sam Pitroda, stirred conversations by advocating for the exploration of inheritance tax akin to the US model within the Indian context.
"In America, there is an inheritance tax. So, if, let's say, one has $100 million worth of wealth, and when he dies, he can only transfer probably 45 per cent to his children, the government grabs 55 per cent. That's an interesting law. It says you in your generation, made wealth and you are leaving now, you must leave your wealth for the public, not all of it, half of it, which to me sounds fair. In India, you don't have that. If somebody is worth 10 billion and he dies, his children get 10 billion and the public gets nothing... So, these are the kinds of issues people will have to debate and discuss," Pitroda said.
However, the US does not have a federal inheritance tax.
Also Read
He added, "I don't know what the conclusion would be at the end of the day but when we talk about redistributing wealth, we are talking about new policies and new programs that are in the interest of the people and not in the interest of the super-rich only."
Refuting any political alignment, Rajan said, "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. 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."
Delving deeper into the economic landscape, Rajan emphasised the need for a thorough examination of segments within the economy that have either not reaped benefits or have undergone a K-shaped recovery.
"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 importantly it could lead to more social conflict," he said.
Talking about employment and reservations, the former RBI governor highlighted the critical nexus between job creation and social stability. "It's also a fight for jobs for reservations because one community is seen as getting more of that than the other," Rajan said.
"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," Rajan added.
