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Friday, April 16, 2021

Dear Finance Minister, can you be the Robin Hood of India.

Oxfam's Inequality Virus report creates a case for India's need for a "Robin Hood budget". The billionaires tax should compensate the income inequality. India wont be the first one to take the option of "taxing the ultra rich" to deal with the pandemic.

Oxfam’s The Inequality Virus report highlights India’s need for a “Robin Hood budget” for 2021. Here are some of the highlights from the report that justify the need.

  • A 4% wealth tax on the top 954 richest families could raise the government income to the 1% of India’s GDP
  • A just 1% tax on the increase in the top 11 billionaires new wealth in 2020 would supplement budget for “JanAushadi” Scheme by 140 times.
  • The amount of new wealth the top 11 India’s billionaires accumulated since March 2020 will be sufficient to sustain MGNREGA scheme for 10 years.

The recent report from the Oxfam titled “The inequality Virus” highlighted how the Covid 19 pandemic worsened the already growing problem of income inequality across the globe. The India’s supplement revealed staggering statistics that highlight the urgency of taxing the ultra rich in the country.

The growth in wealth for the India’s rich is unprecedented:

The below quote from the António Guterres who is United Nations Secretary-General aptly suits the situation in India.

“The COVID-19 pandemic has played an important role in highlighting growing inequalities. It exposed the myth that everyone is in the same boat. While we are all floating on the same sea, it’s clear that some are in superyachts, while others are clinging to the drifting debris.”

Citing an example of a farmer named Rajesh Rajak and his three daughters who killed themselves because of a job loss, the report contrasts the situation with Mukesh Ambani who rose to become world’s richest man on the same day. The report asserted “It would take an unskilled worker 10,000 years to make what Ambani made in an hour during the pandemic and 3 years to make what Ambani made in a second”

Why the 2021 Budget should address this situation the “Robin Hood” way?

Since the COVID pandemic start and subsequent nationwide lockdown, It is estimated approximately Eighty-four percent of the Indian households had taken a loss in income in April 2020. Also a rough estimate of 170,000 people lost their jobs every hour in the month of April 2020. A majority portion of the people who took the worst hit are the people from the low income group. According to a survey, there is a reduction of 37 percent reduction in pre-pandemic income for those earning less than 20,000 rupees. Compare this to 10 percent reduction for people earning more than 60,000.

All this happened while the wealth of India’s billionaires risen up by 35 percent during the
lockdown. At the moment India ranks sixth in the world in the league of number of billionaires index US, China, Germany, Russia and France.

Historical trend of income inequality in India:

The Covid-19 Pandemic reversed years of India’s progress in defeating Colonial era times income inequality. A report from the Banerjee and Piketty (2005) shows that the income at the top 1% of the wealthy in the country reduced from 13 percent to 5 percent between 1950 and 1980. But when the Indian economy got liberalized with pro-business market deregulation policies, the wealth started to accumulate back with the country’s richest again. Between 1980’s and early 2020, the top 1% held wealth rose to 10% of the total wealth.

Income Inequality in India
National Income Growth in India: Full Population vs. Top 1% and Top 10% Income Groups, 1951–2015. Taken from Report INDIAN INCOME INEQUALITY, 1922-2015: FROM BRITISH RAJ TO BILLIONAIRE RAJ? by Lucas Chancel and Thomas Piketty

India comparatively did well in keeping the income inequality in check. However, this pandemic puts India at a greater risk of increasing in-equality like no other time in history.

Extraordinary circumstances require extra ordinary measures:

The COVID 19 Pandemic is nothing like what the world has seen in a distant history. The pandemic had impacted India’s informal sector the most. Of the total 122 million people who lost jobs, 92 million come from the informal sector. This represents 75 percent of the total job losses. This is an extraordinary situation. Taxing the rich may seem unfair at a first glance but is inevitable and only a fair measure given the lack of options.

Of the worst hit, India’s most deserving and vulnerable SC and ST school children come first. Due the sudden halt of Mid day meal scheme, 120 million school children across 1.2 million public schools lost access to the essential nutritious food.

India wont be the first country to use the “Robin Hood budget” tool to deal with the situation. Many countries have already implemented this “Robin Hood” taxation strategy to deal with the pandemic. Peru, Argentina, Spain and Russia have done it one way or the other way.

If India misses this opportunity, it will soon run out of options to deal with this economic inequality and it might be too late before the next budget. Oxfam’s Inequality Virus report creates a case for India’s need for a “Robin Hood budget”. The billionaires tax must compensate the growing income inequality.

Read the full report: Oxfam The Inequality Virus – India supplement 2021.

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