Nobel Laureate Abhijit Banerjee has said he was disappointed the government had rolled back taxes on the rich. He said these steps wouldn't save the economy from the current downturn. Taxing the rich is the first step towards a stable economy where "people are not desperate," he said.
Banerjee, who is a noted professor of Economics at Massachusetts Institute of Technology (MIT) in the US, has been awarded the Nobel Prize (2019) for his efforts to alleviate global poverty. He has won the award along with his wife Esther Duflo and Michael Kremer for their "experimental approach to alleviating global poverty."
During an interview with India Today TV, the Nobel Prize winner vouched for "a more generous welfare state", which is funded by taxing rich people. "I think the government had the right idea and we should move towards a more generous welfare state funded by higher taxes on the rich. I think that is the first step towards a stable economy where people are not desperate; they are not losing their livelihoods right and left. I think that was the right direction and I was supportive of the government's view in that general concept. I was disappointed when the taxes on rich were rolled back," he said.
He added that there is no contradiction between having a well-functioning economy and being generous to the people who are worst off. "I think the idea that high tax rates create extreme disincentives, there is no evidence for in my view. I think that high tax rates make people want to hide their money, but I think the government is getting better at finding," he adds.
Notably, the Modi government had announced a series of measures, including an 8 per cent reduction in the corporate tax and a withdrawal of the controversial enhanced surcharge on foreign portfolio investors (FPIs), to boost the economy after India slipped to a six-year low of 5 per cent GDP in April-June quarter. Following that, the Reserve Bank of India (RBI) also cut the repo rate, fifth time this year, to 5.15 per cent.
Edited by Manoj Sharma