Raghuram Rajan: Dangerous to doubt all rich

Amid a furore over leaked ‘Panama Papers’ showing Indians with alleged offshore tax haven holdings, RBI governor Raghuram Rajan on Thursday warned against a “dangerous” trend of questions being raised about legitimacy of even the ‘entrepreneurial wealth of self-made people’.

Stating that the debate on illegitimacy of wealth has varied from crony capitalism and the illegal acts of bankers to that about passive and inherited wealth, Dr Rajan said, “Now increasingly there is a talk about whether entrepreneurial wealth is illegitimate, whether self-made people should have what they have and whether that’s something a fair game.”

“I think this is dangerous. And the fact that there are occasions when people are found to be hiding their wealth as in the Panama allegations, essentially contributes to this process of de-legitimisation,” he added.

The so-called ‘Panama Papers’, presumably leaked documents of a Panamanian law firm detailing offshore tax-haven entities set up by people from across the world including Indians, have triggered a worldwide debate and probes have been announced in several countries, including in India.

RBI itself is part of the multi-agency group announced by the Indian government to monitor such holdings and take appropriate action.

Speaking here at an industry event, Dr Rajan said there is need for providing ample opportunities to people to sustain legitimacy of wealth.

“Let us not minimise the forces that are travelling around the world... Earlier, the crisis built up the idea that the bankers were illegitimate, that crony capitalism was illegitimate... all of which makes sense. But that’s moved on to passive wealth holding are illegitimate.

“That if you’re a coupon clipper who is clipping what your parents gave you as inheritance, perhaps you shouldn’t have so much and it should be re-distributed,” he added.

“Answer has to be incre-ase the opportunity acro-ss the board. The focus on job creation is important,” he said.