In the last few days, there has been a lot of commentary from the left-liberal ecosystem that the government must spend a lot of money on redistribution and tax the rich in order to do so. Abhijit Banerjee, the poverty-selling economist, painted a Slumdog Millionaire-esque picture in front of the media to argue that the government must focus on redistribution instead of growth.
However, the Economic Advisors of the Modi government have asked the Finance Ministry to put all these bad ideas aside and focus on economic growth by incentivizing the corporates as well as individuals.
“Given India’s stage of development, India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie. Note that this policy focus does not imply that redistributive objectives are unimportant, but that redistribution is only feasible in a developing economy if the size of the economic pie grows,” reads the introduction of the fourth chapter of the Economic Survey, titled – Inequality and Growth: Conflict or Convergence?
The Survey argues that unlike developed countries, in India, economic growth leads to a decline in crime rates, drug abuse and so on. “The relationship between inequality and socio-economic outcomes, on the one hand, and economic growth and socio-economic outcomes, on the other hand, is different in India from that observed in advanced economies,” reads the Survey.
“By examining the correlation of inequality and per-capita income with a range of socioeconomic indicators, including health, education, life expectancy, infant mortality, birth and death rates, fertility rates, crime, drug usage and mental health, the Survey highlights that both economic growth – as reflected in the income per capita at the state level –and inequality have similar relationships with socio-economic indicators,” it adds.
The Survey argued that economic growth is responsible for 85 percent of the poverty reduction while only 15 percent comes from redistribution.
Therefore, as suggested in the Economic Survey, the budget must focus on economic growth and offer tax breaks to corporates as well as individuals. The economy, at this time, needs more and more investment in order to create jobs and attain double-digit growth.
Even in the last economic survey, the office of Chief Economic Advisor made a very strong case for wealth creation.
This shows that the era of socialism is over in India, and the country is progressing towards a ‘rule-based capitalist system’. Wealth creation has always been very important throughout the history of India, but, in the last few decades after independence, the socialist government and communist intelligentsia have despised the wealth creators.
However, the mindset changed after the Modi government came to power with a clear agenda of development. A quote shared in the Economic Survey which reads “Make money – there is no weapon sharper than it to sever the pride of your foes” sums up the mindset of the new government and ‘New India’.
New India is moving towards the model of Chanakyan Capitalism, which argues that the people of the country must not be poor, but they should not get everything from the state, either. Instead, the state should provide means to the people to earn money and become rich. The Chanakya model was of a limited but very strong state, and the Modi government is trying to model New India on Chankya’s India- which was the global economic superpower.