Inequality in Focus: Modi Government’s Taxation Strategy for Wealth Redistribution


India mainly relies on consumption levies rather than directly taxing capital, which analysts blame for the country’s wide disparity between affluent and poor. To close the loophole, the present administration is planning broad changes to its direct tax legislation to replace everything that appears retrogressive. However, the change is conditional on Prime Minister Narendra Modi keeping office in 2024. Furthermore, as new sectors emerge in the digital age, India’s economy is reaching new heights and raising more significant concerns about how its tax laws should be adjusted. These include the flourishing online gaming market and the gambling sector. Click here to learn how to play at real money online casinos in India and the latest developments.

India’s Struggle With Wealth Distribution

According to a recent study, India produced almost 70 millionaires daily between 2018 and 2022. While the country may be a breeding place for millionaires, this success conceals the country’s economy’s proclivity to feed off the welfare of low-income earners. According to Oxfam International, India’s top 10% owns more than 75% of the country’s total wealth, even though only 6% pays income taxes. It implies that rather than wealthy individuals making proportionate contributions, the nation survives on indirect taxes imposed on consumption. For example, the country levies a 30% income tax, which is relatively high, but it levies lower taxes on assets such as stocks and equity funds. According to economists, this violates the idea of equity. It is counterintuitive and could be why India’s poor are slipping further behind. 

Modi’s New Tax Strategy

Prime Minister Modi’s administration is working to repeal antiquated laws and replace them with more modern ones to keep up with the times. According to Rahul Garg, partner at Price Waterhouse & Co LLP, India has to loosen and apply the rules more evenly. The country’s income tax regulations, particularly the capital gains provisions, have become toxic over the years. Modi’s first action in this regard was during his first term, when he replaced various indirect taxes with a goods and services tax, thereby transforming India into a single unified market. It is anticipated that Modi will designate a commission in 2024 to assist in implementing the proposal submitted to the Finance Ministry. This, however, has yet to be officially decided or confirmed. 

The Challenge Ahead

The new strategy aims to achieve a win-win situation. However, Rahul claims that it is more complicated than it appears. Other foreign leaders, such as China’s Xi Jinping and the United States’ Joe Biden, are pursuing an equally admirable goal of closing wealth disparities. However, it has been challenging. Modi’s quest is made more difficult by his people’s lack of trust. Modi is frequently accused of promoting policies that benefit the wealthy despite promising brighter days for the underprivileged during the electioneering period. The preceding governments experienced the same fate. In 2009, it vowed to overhaul the 60-year-old income tax code entirely, but this has yet to happen. 

Final Thoughts

Like many other developing countries, India is attempting to improve its citizens’ well-being, and fiscal policies are the greatest alternative available. However, this aim can only be done at the expense of the wealthy, making it a difficult nut to crack due to the resistance from the rich and powerful. Nonetheless, India can continue on this path by finding a decent enough compromise to decrease the poverty gap without impeding wealth creation opportunities. 

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