'Ask Mr Piketty...': Raghuram Rajan calls French economist’s plan to tax India’s rich as ‘pie in the sky’
Instead of penalizing success, Rajan emphasized the need to optimize resource allocation because the "wealthy always have a way around it (taxes)".
- Dec 20, 2024,
- Updated Dec 20, 2024 10:13 AM IST
India’s wealth tax debate took center stage with former Reserve Bank of India Governor Raghuram Rajan pushing back French economist Thomas Piketty’s call to tax the super-rich.
The author of Capital in the 21st Century, Piketty, at a recent event in Delhi, argued that India must address its widening inequality by imposing targeted wealth and inheritance taxes. Piketty had proposed a 2% annual wealth tax on individuals with assets exceeding ₹100 million ($1.18 million) and a 33% inheritance tax on properties of similar value.
He claimed such measures could boost India’s revenue by nearly 2.73% of its GDP annually, urging India to honor its G20 pledge to collaborate on global wealth taxation.
Rajan, however, dismissed Piketty’s recommendations as “pie in the sky economics.” In an interview to The Print, he questioned the feasibility of wealth taxes, saying, “Ask Mr Piketty where is there an example of a wealth tax that has actually collected enough money to do anything meaningful?”
Instead of penalizing success, Rajan emphasized the need to optimize resource allocation because the "wealthy always have a way around it".
Rajan cited India’s $25 billion subsidies for chip foundries as an example. “Chip foundries won’t give us national security. We’re still dependent on foreign suppliers for machinery, wafers, and rare-earth minerals. Why not channel resources into areas where India has a competitive edge, like chip design?”
Rajan advocated fostering entrepreneurial innovation over imposing wealth taxes. He highlighted India's potential, referencing its 300,000 chip designers, and called for creating firms akin to Nvidia that focus on intellectual property rather than manufacturing.
For Rajan, building capabilities is key. Echoing economist Amartya Sen, he stressed investing in education and research to spur innovation.
“High-quality universities are critical for generating intellectual property. Once we invest in capabilities, everything opens up,” he said.
India’s wealth tax debate took center stage with former Reserve Bank of India Governor Raghuram Rajan pushing back French economist Thomas Piketty’s call to tax the super-rich.
The author of Capital in the 21st Century, Piketty, at a recent event in Delhi, argued that India must address its widening inequality by imposing targeted wealth and inheritance taxes. Piketty had proposed a 2% annual wealth tax on individuals with assets exceeding ₹100 million ($1.18 million) and a 33% inheritance tax on properties of similar value.
He claimed such measures could boost India’s revenue by nearly 2.73% of its GDP annually, urging India to honor its G20 pledge to collaborate on global wealth taxation.
Rajan, however, dismissed Piketty’s recommendations as “pie in the sky economics.” In an interview to The Print, he questioned the feasibility of wealth taxes, saying, “Ask Mr Piketty where is there an example of a wealth tax that has actually collected enough money to do anything meaningful?”
Instead of penalizing success, Rajan emphasized the need to optimize resource allocation because the "wealthy always have a way around it".
Rajan cited India’s $25 billion subsidies for chip foundries as an example. “Chip foundries won’t give us national security. We’re still dependent on foreign suppliers for machinery, wafers, and rare-earth minerals. Why not channel resources into areas where India has a competitive edge, like chip design?”
Rajan advocated fostering entrepreneurial innovation over imposing wealth taxes. He highlighted India's potential, referencing its 300,000 chip designers, and called for creating firms akin to Nvidia that focus on intellectual property rather than manufacturing.
For Rajan, building capabilities is key. Echoing economist Amartya Sen, he stressed investing in education and research to spur innovation.
“High-quality universities are critical for generating intellectual property. Once we invest in capabilities, everything opens up,” he said.