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Rich must be prepared to pay higher tax, says Chidambaram

September 28, 2011 - New Delhi

Union Home Minister P. Chidambaram on Wednesday said the rich should be taxed more.

Chidambaram, who was earlier the Finance Minister of the country between May 2004 and November 2008, however, said that many people would not like this.

Addressing a function of the All India Management Association here, Chidambaram said: "We must raise the tax revenue to defend (the expected aggregate decline of resources). I know many people won't like this. But I think, I can summon the courage to make the statement."

"I am (was) the Finance Minister who slashed your tax rates. Therefore ... you must be prepared to pay higher tax rates, especially the rich must be prepared to pay higher tax," he added.

Chidambaram, who as Finance Minister of the country was credited with presenting a 'dream budget' in the initial years of his tenure, further in Europe rich people were getting together to say: "Please tax us more."

Chidambaram also said that poverty must decline rapidly and at a higher rate than the current one percent, if the country has to achieve inclusive growth in the future.

The concept of inclusive growth is very much the primary focus of India's 12th Five Year Plan.

Indian economy has witnessed steady growth in the last few years. However, the country's agricultural sector is yet to grow at a swift pace and the benefits of the poverty alleviation have not reached to the beneficiaries.

People do not have access to health facilities and financial and social infrastructure is yet to be developed.

"Poverty must decline. The rate at which poverty declined in the first years of liberalisation was about 0.8 percent a year. We believe it's now declining at about one percent a year. Poverty must decline at a higher rate," said Chidambaram.

"So, the lower incidence of poverty and the rate of decline in poverty is an important indicator of inclusive growth," he added.

While the orientation of India's current government towards faster and more inclusive growth is visibly manifested in the theme of the 11th as well as the 12th Five-Year Plan, the need to find a sustainable balance between growth and inclusion has become far more important than ever before.

In fact, several states have shown a remarkable improvement in the 11th year plan.

"For many years, a few states in central India were classified as BIMARU states, a very quaint word but captured the fact that included Bihar, Madhya Pradesh, Rajasthan, Orissa, but the happy development is that states like Bihar, Orissa, Assam, Rajasthan, Chhattisgarh, Madhya Pradesh, Uttarakhand and to some extent, Uttar Pradesh have demonstrated higher growth rates in the 11th plan period than ever before," said Chidambaram.

"In fact, some of them have demonstrated a higher growth rate than even the so-called advanced states," he added.

The biggest challenge before the Central Government is to attain inclusive growth and ensure that the opportunities created are accessible to all.

"In the initial years of economic reforms and liberalisation, the emphasis was and I think, rightly on growth as we need to get away from our belief that India cannot grow more than five percent or so and that with reforms and liberalisation, greater openness and competition, India can grow at eight to nine percent, but it is something we have to believe in first before we could have achieved it," said Chidambaram.

A World Bank report had in May said that attempts by the Indian Government to combat poverty failed to yield the desired result and aid programmes were beset by corruption, bad administration and under-payments.


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