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Growing inequality behind increasing civil strife in India

Mar 21, 2013

Thomas Chandy, Chief Executive Officer, Save the Children India, believes that high crime rate, health problems and mental illnesses, and the increasing civil strife in many parts of India are due to the increasing inequality in society.

Thomas Chandy

Our Finance minister has been bold in announcing a surcharge of 10 percent on individual income more than INR 1 crore. The move to increase taxes on the so called 'super rich' had come under stiff resistance from the economic elite especially the India Inc. The reasons given included that this would affect entrepreneurship, the rich would move domicile to tax friendly countries like Singapore. The number of people affected under this new surcharge is only 42800, which is .0036 percent of the Indian population and .12 percent of the Indian tax-paying population (35 million people). A person earning INR 1 crore would have to pay an additional INR 3 lakhs as per the new taxation announced in the budget, a flea bite.

Despite years of economic growth, India has seen our inequality also increase at a higher rate and our Gini coefficient is higher now than that of days when the country had witnessed years of the 'Hindu' growth rate. The impact of inequality on societies is well studied and documented. We know that a high crime rate, health problems and mental illnesses, and the increasing civil strife in many parts of our country are due to the increasing inequality in our society.  NGOs in the country have consistently been advocating for the reduction of economic and social inequalities.  In the book titled 'The Price of Inequality’, Joseph Stiglitz shows that left to their own devices, markets are neither efficient nor stable and will tend to accumulate money and power in the hands of the few.

While it can be argued that there are several in the top 1 percent due to entrepreneurship, technological and industrial innovations that they have brought about, hence legitimate, a closer look at this group would reveal that many of the top 1 percent are there because of sheer luck, the government patronage that they enjoy after reaching there and the rent seeking behavior that are at display. India is not an exception in this, we have enough evidence from across the world of these gated communities,  be it the plutocrats of America, the oligarchs of Russia or the red party elites of China, how they influence the policies and political institutions which frequently shape markets in ways that advantage the richest over the rest. The number of scandals that have frozen the Indian government and governance recently is simply the evidence of the emergence of the Indian super elite

Hence, more needs to be done by the political system to redistribute the wealth instead of that getting locked up at the top. The surcharge is welcome, though it is a very small step in the larger scheme of things as the people covered are few. Only

3 percent of India's population pays taxes compared to 45 percent in the US. There is no differential taxation for people earning between INR 20 lakhs to INR 1 crore. We need to widen the net and get many who slip through and cast the net upwards to get even more from those who would not feel the difference.

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