Fiscal Deficit & Inequality in India

The Indian government must increase taxes on individuals through a higher progression tax bracket. Instead of promoting indirect taxes, the government must increase taxes on rich and super rich from next year to complement the fiscal stimulus. The top tax rate must increase to at least 40% -45% this year. According to WID, in 2015, top 1% owned 21.3% of the wealth in India. Its Gini Coefficient at 0.33 is lower than China implying higher inequality. According to Oxfam, top 10% own 77% of the total national wealth. Hopefully, the 10% fiscal stimulus planned by the Indian can help the needy and poor. However, an increase in taxes going forward is the right step. The effect of the fiscal stimulus on the Indian economy will be covered separately.

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