Taxing the super rich is an imperative: India, the world’s fifth-largest economy, is on track to become the third largest by 2035. The country’s remarkable growth in recent decades has been driven by domestic demand, government-led infrastructure investments, and private consumption by high-income groups. Yet, beneath this success story lies a grim reality: India is among the most unequal countries globally. The top 10% of the population holds 77% of the nation’s wealth, with the richest 1% owning over half. Meanwhile, the share of the bottom half has dwindled to mere 13%.
Such stark inequality undermines the potential benefits of economic growth, restricting social mobility and fostering resentment. French economist Thomas Piketty’s analysis highlights the critical need for taxing the super rich citizens to address this widening chasm. Piketty calls for progressive taxation, including wealth and inheritance taxes, to fund public investments and ensure a more equitable society.
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The inequality crisis in numbers
Historical data from the World Inequality Lab paints a vivid picture of the rise in inequality in India. The income share of the top 1% surged from 6.1% in 1982 to 22.6% in 2023. Similarly, the number of Indian billionaires skyrocketed from a single individual in 1991 to 162 in 2022, amassing a collective wealth of $1.1 trillion. This concentration of wealth has surpassed even the United States, despite India’s GDP being significantly smaller.
At the same time, technological advances have exacerbated inequality by favouring high-skilled workers while reducing opportunities for low-skilled labour. This shift has left large swathes of the population struggling to keep pace with rising costs and dwindling employment prospects.
Supply-side economics vs progressive taxation
India’s tax reforms since liberalisation have leaned heavily on supply-side economics, reducing tax rates to incentivise investment and production. While this approach has spurred economic growth, it has done little to bridge the inequality gap. The current tax regime—capped at 30% for individuals—falls short of adequately taxing the super rich, whose wealth often escapes the tax net through loopholes and offshore havens.
In contrast, progressive taxation offers a path to more equitable growth. Piketty suggests a 2% wealth tax and a 33% inheritance tax for India, which could generate an additional 2.73% of GDP in revenue. These funds could be channelled into critical public services like education, healthcare, and climate adaptation, addressing pressing societal needs while fostering economic resilience.
Global lessons in taxing the wealthy
Several nations provide compelling examples of taxing the wealthy effectively. Belgium, Austria, and Denmark impose taxes exceeding 50% on high incomes, while countries like Colombia levy wealth taxes on residents’ global assets. The United States and France enforce exit taxes to deter capital flight. Such measures demonstrate that taxing the super rich is not only feasible but also essential for sustaining inclusive growth.
In contrast, India’s abolition of wealth tax in 2015 and its resistance to inheritance taxes have limited its fiscal capacity. Critics argue that such taxes could drive investment overseas, yet international cooperation and modern financial tracking tools can mitigate these risks. The G20’s recent pledge to tax ultra-high-net-worth individuals globally highlights the growing consensus on this issue.
Public spending: The missing piece
Despite rapid GDP growth, India’s public spending remains woefully inadequate. Large segments of the population lack access to basic necessities like nutritious food, quality healthcare, and housing. Public investments critical for climate adaptation and the green transition are also severely underfunded. India’s tax-to-GDP ratio is among the lowest in the G20, reflecting an over-reliance on indirect taxes that disproportionately burden the poor and middle class.
Progressive taxation can address these gaps by mobilising resources to fund essential public services and infrastructure. Increased public spending not only improves living standards but also stimulates economic demand, creating a virtuous cycle of growth and equity.
The ethical imperative
Taxing the super rich is not just an economic necessity; it is a moral obligation. Extreme inequality erodes social cohesion, fuels political tensions, and hinders sustainable development. By taxing wealth and income fairly, India can uphold the principles of justice and equality enshrined in its Constitution.
Reintroduce wealth and inheritance taxes: Levying a 2% wealth tax and a 33% inheritance tax can significantly boost government revenues.
Strengthen financial transparency: Implement measures to track global assets and close tax loopholes, leveraging international agreements on financial information exchange.
Invest in public services: Use the additional revenue to expand access to education, healthcare, and housing, ensuring a safety net for the most vulnerable.
Foster international cooperation: Collaborate with global partners to enforce fair taxation of ultra-high-net-worth individuals, aligning with the G20’s vision.
Promote inclusive growth: Address structural inequalities by investing in skill development and creating opportunities for low-skilled workers.
As India aspires to become a developed economy, the path it chooses will define its social fabric and global standing. Taxing the super rich is not a punitive measure but a pragmatic step towards building a more inclusive and resilient society. By embracing progressive taxation, India can transform its economic gains into shared prosperity, ensuring that growth benefits all—not just a privileged few.
Dr Ravindran AM is an economist based in Kochi. He has more than three decades of academic and research experience with institutions such as CUSAT, Central University of Kerala, Cabinet Secretariat - New Delhi, and Directorate of Higher Education Pondicherry.