Relationship between the state, its citizens, and its taxation, and economic inequality

Despite being a welfare state, economic disparity affects every part of our daily life in India. Despite the fact that we are commemorating 75 years of independence, India’s poor citizens continue to bear an increased economic burden due to inflation, higher taxes, and less benefits.


Relationship between the state, citizens and taxation

  • A concept of welfare state: The legitimacy of taxation is derived from the welfare done by the government.
  • Government’s function: The Indian Constitution envisioned the state’s function as one of welfare. The administration of taxes and their transfer is permitted for that purpose by the government.
  • However, in the year of Azadi ka Amrit Mahotsav, “transfers” are being misrepresented as “freebies” (revadis), while regressive “taxes” are burdening the lives of the poor.
  • As a hidden tax, inflation On people in the lower and middle classes, inflation functions as a secret tax. For instance, diesel cost Rs 65 a litre at the time the central programme Pradhan Mantri Kisan Samman Nidhi, or PM-KISAN, which provided farmers with a cash benefit of Rs 6,000, was introduced. Thus, the cash gain of this system is devoured by gasoline inflation.
  • Highway taxation contrasted with the notion of a welfare state: Roadways are considered public goods and should be provided without charge. However, these services now charge a price due to privatisation and PPP models. The government collected Rs 35,000 crore in toll taxes for the fiscal year 2021–2022. By 2025, the same is anticipated to reach Rs 1.34 lakh cr.
  • An implied fiscal load results from the redirection of funds destined for one sector to another. For example, the road cess that was meant to pay for road building is redirected to other projects while citizens pay high tolls for the roads, adding to their already substantial toll burden.
  • The situation involving municipal taxes and user fees: When residents pay municipal taxes, the municipality is expected to provide sanitary conditions. However, to keep the city clean, the Ahmedabad Municipal Corporation (AMC) implemented a “User Charge” of Rs 365 per family, or 15% of the municipal tax amount.
  • Administration’s discriminatory actions: Financial costs associated with flawed administrative regulations are also passed on to society’s lower and middle strata. The government doesn’t care whether cars are parked on the road; nevertheless, if two-wheelers are parked there, they will be towed.


Discriminatory treatment to rich and poor in the name of welfare state

  • The state-citizen connection is weakened by the monetization of public areas. People are said to become citizens when they assume ownership of and responsibility for public spaces. It should be kept in mind that the state’s connection with its citizens may deteriorate if public areas are commercialised.
  • Even the terminology used by governments reveals a discriminating approach: While financial assistance supplied to the poor is referred to as revadi, it is more lucratively referred to as a “incentive” for the wealthy.
  • Food that is subsidised is publicised, but corporate incentives are not well-known: India is covered in posters advertising food subsidies for the needy, but there aren’t any shouting about the Rs 1.97 lakh crore “reward” handed to the corporate sector under 13 production-linked incentive programmes.
  • Faulty system for personal information in the name of transparency: The government posts the personal information of every MGNREGA employee on its website in the name of transparency, but in order to respect the principles of privacy, the same government withholds the names of intentional bank defaulters.


The richest 1% in India received 73% of the wealth created in 2017, while the wealth of the lowest 50% of the population increased by just 1%. The Azadi Ka Amrit Mahotsav should be centred on creating a wealthy and egalitarian India from an economic standpoint.

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