'Try and elevate, rather than bring the successful down': Raghuram Rajan on wealth redistribution debate

Former Reserve Bank governor Raghuram Rajan

Economist and former Reserve Bank of India governor Raghuram Rajan recently weighed on the wealth redistribution debate, which has dominated the ongoing Lok Sabha elections discourse in the past few weeks.

Rajan, who had joined senior Congress leader Rahul Gandhi in his Bharat Jodo Yatra last year, said taxing the wealth more was not the solution to reduced inequality.

“We need to try and elevate rather than bring the successful down," the economist said. He was speaking at an event at the Kellogg School of Management, Northwestern University.

He further added that he is an academic and has a duty to criticise.

“…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.”

The comments come in the backdrop of Indian Overseas Congress chairman Sam Pitroda saying that “inheritance tax was an interesting idea and India should explore it”.

"If a person has property worth US dollars 10 million, then after his death, 45 percent of the property goes to his children and 55 per cent of the property goes to the government," Pitroda told ANI.

This gave fodder to the Bharatiya Janata Party and Prime Minister Narendra Modi, who accused the grand old party of planning to “seize and redistribute the wealth of Indians”. PM Modi also made a few remarks for which the Election Commission issued a notice for the violation of the Model Code of Conduct.

However, Congress chief Mallikarjun Kharge said the party had no intention of bringing an inheritance tax. "There is a constitution, we don't have any intention of doing this. Why are you putting BJP's words in our mouths? They are just saying all this for votes," Kharge said.

Pitroda also defended his remarks and said wealth distribution can be done through policy measures such as increasing minimum wages. “If we come up with a minimum wage in the country saying you must pay so much money to the poor, that's the distribution of wealth," Pitroda said.

The former central bank governor also said there needs to be a thorough examination to identify groups who have not benefited from the growth of economy.  "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?" he said.

He also said the country needs to look at job creation and social stability together. "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."