If we look closely at our economy, India has come a long way with respect to the Wealth the countrymen have amassed. The levels of income have constantly been on the rise. This is not specific to India, but looking at the other countries in the world, the wealth creation has increased by manifolds all across.
However, an important perspective to look at is, most of the wealth has fallen into the hands of the rich few. According to a Cedit Suisse report, the richest 1% of Indians, own 58.4% of its wealth. Trend shows that this gap will only widen in the future. According to the same report, India is the 2nd most unequal nation in the world after Russia where 1% of the Russian population hold 74.5% of their total wealth.
So what makes the economy more equitable? There are ample measures the Government must take, before admitting to the fact of massive income inequality. SMS College analyses a few of them:
- Progressive Taxation. A progressive taxation regime is one method that has gained popularity among many states who are concerned about welfare of its people, like ours. A progressive taxation system is a system wherein the amount of tax payable increases with the taxable amount. This is a sustainable effort where the Government is following the policy of “Rob Peter and Pay Paul”. In other words, tax the so-called “haves” and pay for the “have-nots”. This is considered as a good measure to bring in income equality, in addition to paying for public goods and services for the masses. A country having a majority of its tax revenues by taxing income and consumption is one step closer to closing the gap between the rich and the poor.
- Income declaration by means of demonetising the current currency. The Government can rid the society of the ills of unfair amassing of wealth in the form of undeclared money, by introducing measures like demonetising the current currency. This cannot be done often, but once out into practice, this measure will help people come out clean and declare their wealth – and put a sustainable system of income tax in place. The government can go after economic fugitives and confiscate assets of people, who typically evade taxes. .After demonetization, this step should further strengthen the Centre’s pockets which can help our revenue deficit situation to an extent.
- Tax Holiday for establishments. Another measure by the Indian Government towards economic equality has been in the corporate sector taxes. In an effort to spur the entrepreneurial network in the country, the finance minister announced an extended tax holiday to up to any 3 years out of the first 7 years of establishment. 96% of the firms filing tax returns in India are MSMEs. To encourage and motivate the small firms, corporate income tax on small and medium enterprises has been cut to 25% .
These measures, if implemented well, should be enough in bringing down our notorious ranking as the 2nd most unequal nation in the world and make our country a nation that has its strength and wealth with the masses.