Raghuram Rajan Says Taxing The Rich Is Not The Solution For Economic Growth

Rajan noted that inclusive growth will help drive economic development forward, however, he advocated against taxing the wealthy to a huge extent

Former RBI Governor, Raghuram Rajan, said that wealth tax cannot be used to accelerate economic growth. The economist termed inclusive growth as crucial for economic development, however, expressed his inhibitions on achieving this target by taxing the rich. 

Speaking at an event at the Kellogg School of Management - Northwestern University, the former Reserve Bank of India governor said, “We need to try and elevate rather than bring the successful down,” reported Business Standard. 

Notably, Sam Pitroda, Chairman, Indian Overseas Congress, recently advocated for looking into the inheritance tax system in the US and its implementation in India. The politician spoke in favour of the inheritance tax and stressed the need to debate and discuss issues regarding wealth redistribution. However, the US doesn’t have a federal inheritance tax.

Denying any political inclination, 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.”

Rajan noted that inclusive growth will help drive economic development forward, however, he advocated against taxing the wealthy to a huge extent.

Commenting on the Indian economic landscape, the economist said that all sectors of the economy need to be examined that have not received the benefits or have experienced 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,” Rajan stated.