I stumbled upon this article on the internet. While the article talks about Inequity, Initiative and Inclusive growth in the Philippines, I think it has an really interesting anecdote that might explain some of the pitfalls of a socialist system. Some effects of this system [as explained in the anecdote] can be seen in India already.
“An anecdote making the rounds of the Internet aptly illustrates why this cannot be the way to go. As the story goes, a professor known to have never failed any student in the past suddenly found himself failing an entire class. The class had proposed a grading system based on the socialist ideal where no one would be poor and no one would be rich. The professor thus adopted a system where all grades will be averaged, with everyone receiving the same grade. This way, everyone thought, no one would fail and no one would stand out and get an A. After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset, while those who studied little were happy. For the second test, the lazy students studied even less, and the better students decided it wasn’t worth studying as hard as before. The average grade for the second test was D, and no one was happy. By the time of the final test, the average grade had dropped to F, and everyone flunked the course. As the tests proceeded, it became clear that students were unwilling to put in effort that would only benefit someone else. In like manner, an economic system that takes from the rich to give to the poor for the sake of equality is likely headed for overall decline.“