rnin   o io     onomi ss es           21.17
     But the challenges are not insurmountable; besides    economic transformation today, provided the
     several possible ways are available to address them.  Government can mobilise adequate amount of
     As the support for the idea has come from a broad     fund for the process of redistribution. One very
     ideological spectrum, it looks as if the time for     weak link to tapping fiscal capacity of the economy
     such a scheme has arrived in the country. We          has been the lower legitimacy in the State.9
     should think proactively in the direction.
                                                           globAl exPerience
        8. legiTimAcy iN STATe AND Socio-                  Higher legitimacy in state strengthens democracies
           ecoNomic TrANSformATioN                         in general. In case of tapping the fiscal capacity of
                                                           the economy legitimacy in state has been found
     introDuction                                          to be among the most important variables. In this
                                                           regard, the history of developed countries suggests
     Democracies of the world have evolved much
                                                           two important things:
     since they came into being. India joined the
     club late though it is among the most vibrant                (i) The foremost duty of the State is to
     democratic economies of the world today with                       supply ‘essential services’ such as,
     its own set of strengths and weaknesses. Socio-                    physical security, healthcare, education,
     economic transformation of the country could                       infrastructure, etc.
     be considered as the most prime aspiration of              (ii) Redistributive role of the State comes
     India. The same resonance we find throughout                       later on.
     the period of freedom struggle, in the debates of           The above-described sequencing is not
     the Constituent Assembly and the Constitution         accidental. Unless the middle class in society
     of India also. Numerous efforts have been made        perceives that it derives some benefits from the
     by the governments in this direction though the       government/state, it will be unwilling to support
     performances have not been up to the desired          (i.e., finance) the government moves of income
     levels. There have been several minor reasons         redistribution. In other words, we can say that
     responsible for it, but the major reason has been the a government needs to earn the legitimacy to
     lack of financial resources to push it. The revenue   redistribute income from the effectiveness of its
     that governments get by way of taxes is not a form    public service deliveries.
     of income only, but it is a measure of the fiscal           If the Government tries to redistribute income
     potential of the nation, too. India has not been      without guaranteeing effective deliveries of the
     able to tap its actual fiscal potential by now. While public services, the middle class starts ‘exiting
     its potential of tax collection is estimated to be    the state’ (the famous idea of Albert Hirschman,
     53 per cent of the GDP, it collects only about 17     1978)—the middle class ultimately shies away from
     per cent. It means a vast fiscal potential remains    financing the schemes of income redistribution.
     untapped. Given the resource crunch faced by the      One important sign of exit is fewer number of tax
     country, it is high time that the country moved in    payers—abundantly evident in case of India. By
     the direction of enhancing the fiscal capacity of     reducing the pressure on the state, middle class
     the economy.                                          exit will shrivel it, eroding its legitimacy further,
          In case of India, ‘income redistribution’ (the
     recent proposal being UBI coming from the                 9.    The write-up is primarily based on the Economic
                                                                     Survey 2016-17 and 2015-16 together with the Union
     Economic Survey 2016-17) is suggested to be the                 Budget 2017-18 and other releases of the Government
     single most important way out to promote socio-                 of India.