How should a poor country treat its rich? Nearly three decades ago, India embarked upon free-market economic reforms after a failed dalliance with state planning that almost drove it to bankruptcy. It looked as though the country had settled the question. The world’s second most populous nation—like Deng Xiaoping’s China before it—would shed its suspicion of private business. To get rich would be glorious in India, too.

Today things look less certain. Needing resources to fund an ever-expanding list of social programs for the poor, Prime Minister Narendra Modi’s government has doubled down on soaking the rich. Last month’s budget proposes what the media have called a “super-rich tax”—a 25% surcharge on the tax levied against incomes over 20 million rupees (about $275,000) and 37% over 50 million rupees. This takes the effective tax rates up to 39% and 42.7%. (Currently, a 15% surcharge applies to incomes over 50 million rupees.)

The Modi administration has also weaponized a cockamamie idea pioneered by its predecessor—that large companies must spend 2% of their profits on projects in keeping with “corporate social responsibility.” It proposed three-year jail terms for executives whose mandatory CSR spending does not pass government scrutiny. An uproar has forced the government to promise not to “operationalize” this decision.

Add to this growing “tax terrorism,” the Indian term for harassment by officials, and some of the highest corporate tax rates in Asia (30% on large firms), and you get a picture of businessmen increasingly squeezed by a greedy government. Last month the founder of a popular Indian coffee chain, Coffee Day Enterprises , allegedly committed suicide citing pressure from creditors and harassment by tax officials.

“In India, being against the wealthy is associated with being pro-poor,” says Naushad Forbes, a former president of the Confederation of Indian Industry. “It’s a throwback to the populism of Indira Gandhi.” Mr. Forbes adds that India is nowhere near where it was under Gandhi in the 1970s and 1980s—at one point marginal income-tax rates reached 97.5%. Nonetheless, the signs of excessive government zeal are familiar.