1.Grow the pie: Rising inequality per se isn’t a big problem if economic growth raises incomes overall

Oxfam International and its India unit recently brought out two separate reports on the same subject, inequality. It’s a politically salient topic and understandably generates debate. However, the suggestions in Oxfam’s reports don’t capture the nuances of the problem and, therefore, their solutions are unworkable. None of this is to suggest that concentration of economic wealth is good. An economy in the grip of oligarchs will stagnate and shut off opportunities for everyone. The issue, however, requires parsing.

Oxfam has followed a popular approach to measuring inequality. It has used wealth, not income, as the yardstick. This approach is lopsided as it tilts towards using the market value of financial assets which fluctuate almost every minute. Oxfam India has made three suggestions in this context. One, is to ask for better measurements and more regular ones. Good quality statistics are a public good and GoI needs to raise its game here. The other two suggestions pertain to taxation. Oxfam asks for a wealth tax and a temporary 1% surcharge on the richest 10%. It’s in the area of taxation that the suggestions consider neither the trade-offs involved nor India’s history with wealth tax.

India did levy a wealth tax. It was abolished in the 2015 Union Budget. It was a feel-good tax with no meaningful impact. To illustrate, in its last year (2015-16), GoI could raise only Rs 1,079 crore as wealth tax. That is, just Rs 1.4 for every Rs 1,000 that accrued through direct taxes. To compensate for its abolition, a surcharge on incomes above Rs 1 crore was levied. There are practical difficulties in taxing wealth, which has also been influenced by more than a decade of loose monetary policies of major central banks that are trying to boost economic growth. What really matters is economic growth and the creation of pathways to economic mobility.

Post-1991, the rise in India’s economic growth lifted millions out of poverty even as inequality widened. Economic growth is indispensable to provide the opportunity of a better life to everyone. Policy needs to focus on obstacles to growth, including rent-seeking. In this context, we need to note that a clutch of US billionaires who draw Oxfam’s disapproval didn’t inherit their wealth. Their ideas created their wealth and millions of other jobs and opportunities. That’s what India needs. Policy focus should be on creating pathways of economic mobility, not messy taxation laws. The size of the pie needs to grow.

2.Jabs & rights: Vaccine mandates are necessary in some cases but can’t be linked to delivering welfare benefits

The Centre’s clarification in Supreme Court that it hasn’t issued vaccine mandates for any purpose brings into sharp focus state governments and municipal bodies denying access to various places as well as various public services to the unvaccinated. Safeguarding public health is among primary responsibilities of state governments and civic bodies. To that extent their keenness to promote vaccination and mitigate threats to public health is understandable. As we have argued before, public health concerns on infectious spreads must sometimes override individual rights when it comes to an epidemic. Therefore, restricting or denying access to public transport or to marketplaces, malls, places of work and worship is justifiable – whether done by government or private bodies. Same goes for vaccine mandates for government staff and government schoolteachers.

But it is wholly another matter when vaccination status is linked to welfare benefits. Madhya Pradesh linked PDS rations to vaccination and Kerala health department had directed government hospitals to withhold free Covid treatment to unvaccinated patients. A poor person’s right to PDS rations poses little threat to public health. Denial of food rations to poor households is a terrible outcome that can’t be justified on any ground. Government duty to protect every human life can be located in the right to life under Article 21, some scholars argue. But more than that, denying poor citizens free treatment is a travesty of a state’s basic duties. A better-off citizen who’s unvaccinated can access private healthcare. Basic test of humaneness therefore says a low-income Indian can’t be denied public healthcare.

India’s pool of unvaccinated plus partially vaccinated is worryingly large, and states are right to be concerned. But they should keep welfare benefits out of the equation. And, most important, they must do a lot more to convince zero-dosers and one-dosers to get those jabs. This should now include serious plans about taking vaccines to the people.

3.Bad start: on Australian Open build-up

The Djokovic visa controversy seems to have marred the run-up to the Australian Open

In recent times, the season-opening Australian Open has been played against sobering backdrops. If in 2020 the unprecedented bushfires marred the build-up, in 2021 it was the turn of COVID-19 lockdown restrictions to suffocate players. Nothing however compares to the saga that unfolded for 10 long days leading into the 2022 edition, which began on Monday. World No.1 Novak Djokovic, a nine-time winner in Melbourne, had his visa cancelled and was jettisoned over his decision to remain unvaccinated. Australia’s high inoculation rates have been credited for keeping its death rate low despite an ongoing surge in cases. In such a setting, the presence of an unvaccinated star, who has also not displayed COVID-appropriate behaviour in the past, was a tough sell. With Roger Federer also absent, the main drawcard is now Rafael Nadal, the only former Australian Open men’s singles champion in the fray. The Spaniard is locked with Federer and Djokovic on 20 Majors and can take sole possession of the record for most Grand Slam men’s singles titles with his second trophy Down Under. But by his own admission, Nadal is not in Slam-winning form, though he won a tournament last week in his first competitive appearance since last August. If the 35-year-old rediscovers his mojo to erase the pain of having lost four finals in Australia, it will be an achievement befitting his storied career.

The favourites for the men’s title are thus Daniil Medvedev, the World No.2 and reigning US Open champion, and the third-ranked German Alexander Zverev, Olympic gold-medallist and the ATP Tour Finals winner last year.

4. Inflation conundrum

High price rise trends could continue in 2022, compounding the challenge for policy makers

While North Block mandarins seek to conjure up policy levers in the upcoming Budget to spur India’s fragmented economic recovery along, the latest official data suggest industrial output is stuttering with a meagre 1.4% growth in November. More worryingly, inflation is re-emerging as a threat — retail prices surged to a five-month high of 5.6% in December from 4.9% in November. While urban India continued to record a higher incidence of price rise at over 5.8%, inflation faced by rural consumers was at 5.36% — the steepest pace since July 2021. A dozen States clocked higher inflation than the headline 5.6% level, with half of them recording well over India’s stated inflation tolerance threshold of 6%, led by Haryana and Tamil Nadu with an over 6.6% print. While the CPI cooled month on month by about 0.35%, this was offset by low base effects that pushed up inflation in food and beverages, and higher clothing and footwear prices. The deferral of a higher GST on textiles, and softening food and vegetable prices this month, may help rein in some of these pressures, but there are other headwinds. Fuel prices moderated after excise duty cuts in November, but this may not sustain for long as average prices for India’s crude oil basket are now at around $84. For now, retail fuel prices have remained static, but this may have more to do with the unstated tendency of not effecting such hikes in the poll season. By Monday, yields on government bonds had hit a two-year high which could upset the fiscal math over time.

Inflation in wholesale prices offered little comfort in December even as it came off a record high of 14.2% in November to touch 13.6%, staying above double digits for the ninth successive month. Economists believe that the persistent gap between wholesale and retail inflation, now at eight percentage points, does not augur well for price stability ahead. Producers coping with high commodity prices and input costs will have to find ways to pass them on to consumers, feeding into retail inflation and squeezing household budgets further. For industry, inflation is as critical an obstacle to higher consumption and growth impulses as the new virus mutations and the third wave — which by itself is expected to further stoke retail prices. Consistently high inflation, as witnessed since the pandemic onset, constitutes not just a tax on the poor and the middle classes, but is also a potentially permanent wrecking ball for future spending capacity (and growth) amid a damaged job market. The Government, through its statement of intent in the Budget, and the RBI, which has noted that the waning of inflation spiralling across geographies may ‘take longer’ than expected and will review its monetary policy stance next month, need to communicate their inflation game plan to soothe expectations.