RETROGRADE

Rahul Gandhi on ‘ financial surveys’ and ‘ revolution,’ Pitroda’s idea on inheritance are bad economics — and bad politics, too

IT IS AN idea that harkens to perhaps the worst aspects of India's socialist past. The chairman of Indian Overseas Congress, Sam Pitroda's comments on the inheritance tax, have raised the spectre of wealth redistribution, almost four decades after the very same Congress party under Prime Minister Rajiv Gandhi had abolished it. The then finance minister V P Singh had noted that the estate duty, or the inheritance tax as it was then called, had “not achieved the twin objectives with which it was introduced, namely, to reduce unequal distribution of wealth and assist the states in financing their development schemes.” Clarifications on Pitroda's remarks by a string of party leaders do little to allay concerns. Especially given how, of late, Rahul Gandhi himself has been framing his party’s twin planks of social justice and economic welfare. Speaking at Hyderabad, he promised a financial and institutional survey to find out who holds the country's wealth. He added that, “after this historic step, we will take revolutionary measures.” Read with Pitroda, there is an allusion to wealth redistribution.

Such talk is hare- brained, retrograde, and a classic self- goal. More so when the Congress itself had withstood pressure during the UPA'S term to reintroduce this tax. This not only turns the clock backwards, it also reveals an inability to learn from the past. Collections from the tax are likely to be a pittance considering state capacity and the myriad ingenious ways that are likely to be constructed to avoid paying the tax. In fact, this was even the case when the tax was in place. The then finance minister had acknowledged in his budget speech that collections from the tax were “only about Rs 20 crore” and its cost of administration was “relatively high”. Ironically, Pitroda’s pearls find no mention in the Congress party's manifesto. In fact, the manifesto, on the issue of tax, makes some encouraging noises – for instance, it speaks about ushering in an era of “transparency, equity, clarity and impartial tax administration”, ensuring “stable personal income tax rates”, “lessen( ing) the burden of tax”, and eliminating “exploitative tax schemes”.

That concentration of capital is a problem, that marginalised sections must get a legup, that efforts must be made to address inequalities of opportunity, expand the pie, is beyond debate. The Congress has promised a socio- economic caste census as a tool of affirmative action that will address inequalities rooted in historical injustices. Yet, the cavalier manner in which Gandhi has conflated these two issues, in the middle of an election campaign when there is little room for nuance, raises fears of a direct assault on wealth. And that, too, when the story of India's wealth creation has just begun. There are indications that more and more Indians from all walks of life are beginning to participate in wealth creation -- – there are now more than 150 million demat accounts in the country as per recent data. By portraying the caste census as a magic wand that will deliver justice to one and all, by loosely talking of “surveys” and “revolutionary” steps, by floating the inheritance tax trial balloon, the Congress does a disservice to its own economic journey three decades after the landmark 1992 reforms that brought the curtains on the Licence Permit Raj. In the name of votes, Rahul’s colleagues should tell him, it’s unwise to fiddle with those curtains.