Wealth redistribution row: Does the Constitution have a provision to allocate assets?

Amid the battle for the ballot, the Congress’ stance on wealth redistribution and now Sam Pitroda’s remark on inheritance tax has caught the attention of the ruling Bharatiya Janata Party (BJP) and stirred a hornet’s nest.

At an earlier campaign rally, Prime Minister Narendra Modi had said: “The Congress shahzade says if his government comes, they will investigate who earns how much and how much property they have. Not only this, he further says the government will take over the property and redistribute it. This is what their election manifesto is saying,” the prince reference being Rahul Gandhi.

And on Wednesday (24 April), Congress leader Sam Pitroda stirred up another debate when he spoke of inheritance tax as an example of redistribution of wealth. Unsurprisingly, his comments prompted the
Congress to distance itself
, with Jairam Ramesh saying on X: “Pitroda expresses his opinions freely on issues he feels strongly about. Surely, in a democracy an individual is at liberty to discuss, express, and debate his personal views. This does not mean that Mr Pitroda’s views always reflect the position of the Indian National Congress. Many times they do not.”

As the discussion on the matter heats up with the
Congress and the BJP trading charges
on the issue, here’s an expansive guide on wealth redistribution, the Constitution’s stance on it and the Supreme Court’s take on the matter.

What is wealth redistribution? Is there a need for it?

First off, let’s understand what exactly does wealth redistribution mean.

A day after the Congress released its
manifesto
on 5 April, Rahul Gandhi in a rally indicated that if voted to power, the party would carry out a wealth redistribution exercise. “First, we will conduct a caste census… to know the exact population and status of backward castes, SCs, STs, minorities and other castes. After that, the financial and institutional survey will begin. Subsequently, we will take up the historic assignment to distribute the wealth of India, jobs and other welfare schemes to these sections based on their population,” he said.

In layman’s terms, what Rahul indicated was a Robin Hood scheme — to rob the rich and pay the poor. In fact, the meaning of wealth redistribution is the transfer of wealth from one individual to another through a social mechanism such as taxation, charity, or public services.

One biggest example of wealth redistribution would be income tax wherein higher earnings pay a higher percentage of tax compared to lower-income earners.

Proponents of this exercise note that wealth redistribution is necessary to bridge the inequality gap between members of a society.

And in India, the gap between the rich and the poor is only growing further. As per a recent study, the country’s richest one per cent of the population now owns 40 per cent of the country’s wealth. According to the report titled Income and Wealth Inequality in India: The Rise of The Billionaire Raj, and published by The World Inequality Lab, “the inequality gap widened after the economy’s opening up in the early 1990s, but “between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration”.

Based on figures from the World Inequality Database, India’s income inequality is among the very highest in the world, behind only Peru, Yemen and a few other small countries, the authors said.

What does India’s Constitution say on wealth distribution?

India’s Constitution-makers haven’t explicitly spoken of wealth redistribution. However, Article 39 states “that the ownership and control of the material resources of the community are so distributed as best to subserve the common good”.

Furthermore, the State shall direct its policy towards securing “the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment”.

It’s noteworthy that when Article 39 (Draft Article 31) was being added to the Constitution, it was heavily debated. A blog, constitutionofindia.net, writes that the economist KT Shah wanted the Constitution to outrightly prevent the creation of monopolies in industries. In agreement with him was Shibban Lal Saxena, who wanted it to be explicitly put down that the State shall control a few key industries. However, there were others Naziruddin Ahmad, who were not comfortable with the Constitution endorsing contested political and economic ideologies.

What about the Supreme Court?

Interestingly while the topic of wealth redistribution is being discussed among political parties, it is also being heard in the Supreme Court.

On Tuesday (23 April), a nine-judge bench began hearing on the issue whether private property can be brought under “material resources of the community” which the state is called upon to distribute equally as per Article 39(b) of the Constitution.

This hearing stems from dissenting views on whether community resources are included private properties. Advocates arguing the case state that such a view has no place in a democratic country governed by a Constitution giving primacy to fundamental rights of citizens.

And this was agreed by Chief Justice DY Chandrachud.

How has the Congress reacted?

With the PM using Rahul’s statement as political fodder ahead of the polls and the BJP training its guns at the Congress, the Grand Old Party has attempted to clarify and explain what their leader means by wealth redistribution.

Praveen Chakravarty, chairman, Professional’ Congress, an arm of the Indian National Congress, and one of the key architects of the manifesto, clarified to Moneycontrol what the party means.

He explains to the news portal that wealth needs to be thought of in the broader context of budget and resources. “Isn’t reservation, wealth?” he asked. “It’s only for the elite in Delhi where wealth redistribution means I am coming to your home and taking your Rolex watches… No way does it mean that we will come into your home and take away your Rolex watches. The solution is to create certain policies. No way does it mean that we will come into your home and take away your belongings… Under what law in the Constitution can someone take away wealth like that?” he added.

“I know every line in the 45 pages of the manifesto. Nowhere does it say that we will redistribute wealth. Economic inequality is a problem and we have to address that,” Chakravarty stated.

It will be interesting to see if the Congress’ comment will hurt the party or not at ballot box. For that, we shall wait until 4 June when the results for the 2024 Lok Sabha elections will be announced.