Rahul Gandhi’s announcement of the minimum income guarantee scheme (Nyunatam Aay Yojana or Nyay) through which the Congress promises to dole out Rs 72,000 annually to each of India’s poorest families if voted back to power, is a formal acceptance of defeat. It signifies that the grand old party, its chief and generals are devoid of imagination and ideas, but not short on pre-election gimmick.
The Nyay scheme is not a game changer. It looks, smells and feels like a stunt pronounced on the cusp of an election that Congress reckons will be tough to win unless it takes recourse to desperate ploys, and a cash handout scheme that provides little details beyond the promise of cornucopia for the poor verily fits the bill.
The details of the scheme are so vague that a reasoned critique is impossible unless we know the modalities. What we do know from Rahul's news conference on Monday is that the bottom 20 percent of India’s poorest families will receive Rs 6,000 per month directly in their bank accounts under the minimum basic income guarantee scheme. The Congress chief has claimed that the programme would benefit five crore families: that's 25 crore people.
Congress’ data analytics chief Praveen Chakravarty has put the outlay at Rs 3.5 lakh crore (the arithmetic comes to around Rs 3.6 lakh crore) and Rahul has claimed that “top economists” have endorsed the scheme as a “doable”. Rahul didn’t mention who these “top economists” were.
He also claimed the Congress will remain fiscally responsible in implementing it. All of this sounds very nice, but improbable. The idea of a minimum income support is not new. It is a better option than India’s countless subsidy interventions that have a distortionary impact on markets.
But such a scheme may work only if the existing subsidies are subsumed into the scheme, leaving people with money that they spend on areas that they need to. So, the most important question that Rahul needed to answer while announcing the scheme is, where will the Rs 3.6 lakh crore come from?
The figure translates to around two percent of India’s entire GDP (assuming it is Rs 188 lakh crore according to 2018-19 estimates) and around 13 percent of India’s total budget. If Congress’ scheme is “budget neutral” (that is, if it replaces all explicit central subsidies including the employment guarantee scheme) then it is indeed doable but there would be devilish problems in implementation.
Any policy intervention to address income inequality or alleviation of poverty through redistribution of wealth needs backing of reliable data that accurately measures all metrics. If there are no mechanisms in place, then implementation will remain ineffective and breed corruption. It will become part of the problem, not the solution. What is the guarantee that households will correctly declare their income?
As this piece in The Print pointed out, “How would one determine who are the 20 percent poorest Indians? More importantly, how would they determine their family incomes? There are no mechanisms in place. Not only will this scheme run into bureaucratic hurdles, it doesn’t account for fluctuating incomes either. What happens when somebody with a secure job doesn’t have the job anymore? In professions like agriculture, farmers don’t have an income for many months until they harvest their crop and earn money.”
However, if Rahul claims to provide the money in addition to the existing subsidies, then it is a loony idea that can never be afforded. The country simply doesn’t have the resources and it would involve so much fiscal irresponsibility that the domino effect would bring down the Indian economy. Remember that the Congress chief has promised to be “fiscally responsible”.
Neither the Congress president, nor former finance P Chidambaram or Congress’ data analytics chief Chakravarty were willing to provide the only detail that matters.
Rahul made some political statements such as — “In the past five years, people had to suffer a lot. The Congress wants to give justice to the poor and eradicate poverty…” — as if India’s poverty problem coincided with Narendra Modi’s tenure as prime minister. The Congress president also called it a “final assault on poverty”, which is a tacit admission that its five-decade rule over India since Independence has failed to eradicate the menace, even though Rahul’s grandmother famously called for “garibi hatao” in 1971.
Chidamabaram was too clever by half, telling BloombergQuint “all I can say is that it is doable” without going into the fine print. His excuse “we will do the math when we are in government. Because all the information will only be available when we are in the government,” sounds as if the Congress had never been in power.
More importantly, Chidambaram and Chakravarty said completely different things to the media. The former finance minister said “some families will be 10 percent below the minimum level, some 30 percent and some 70 percent. So the amount that will reach each family will obviously be different,” according to the report mentioned above.
Meanwhile, talking to Business Standard, Chakravarty, who has been tweeting away information about the scheme, said: “Every beneficiary gets Rs 6,000 a month” in reply to a question on whether every beneficiary will get a flat Rs 72,000 or an income gap. Chakravarty reiterated that “everyone gets the same amount.”
This anomaly from the people who presumably are the brains behind Nyay suggests that Rahul was being economical with the truth when he claimed that every aspect this scheme has been “thought through.”. If such an ambitious scheme has not been thought through, then what was the need for it to be announced just days before the elections? What was the hurry?
One answer could be that the Congress is suffering from a lack of self-confidence in tackling the Modi juggernaut, and was compelled to announce a half-baked idea as a “scheme” replete with big numbers to manage the headlines and pitch it as a bounty for the electorate. Scratching the surface gives us interesting insights into the scheme.
In his interview to the Business Standard, Chakravarty gave some skeletal idea about the scheme. He let the reader know what the Congress president perhaps forgot to mention: the programme will be unfolded in phases. He also revealed that the budget for 2019-2020, should the Congress come to power, will not “reflect the number” and at no point will the total outlay of Rs 3.5 lakh crore “be more than 1.2 percent of the GDP at its peak.”
This tells us that the scheme will be implemented in a graded manner and the final unfolding may be delayed till the fifth year of the government. This possibility, as pointed out in Swarajya, means “we are talking a cost of just over 1.1 percent of GDP – less fiscally irresponsible, but a scheme essentially lower in real terms (ie, after inflation adjustment) than what has been promised.” It calculated “the real value of Rs 72,000 annually” to around “Rs 58,700-and-odd by 2023-24.”
If Rahul's scheme of Rs 72,000 annually for the poorest works out to an annual outlay of only Rs 58,700 (going by Chakravarty’s plan and Jagannathan’s math on inflation) by the time Nyay is fully implemented (once again, assuming that it is accurately implemented by some mechanism that is yet unavailable to policy makers), then the scheme is a fraction of the ‘big bang’ that we have been led to believe.
And if this scheme subsumes the subsidies, as Chakravarty seems to suggest and Rahul seems to indicate with his stress on fiscal responsibility, then it appears that the NDA government is already giving the poor more than what the Congress promises to provide through this scheme. According to the calculations provided by Union finance minister Arun Jaitley in a Facebook post on Monday, Rs 5.34 lakh crore is already being provided by the government as subsidies and transfers to the poor.
Jaitley wrote, “If multiple bank transfers to the five crore poor families, the existing payment to which is mostly being done. The above averages Rs 1,06,800 annually as against Rs 72,000 which is the Congress now seeks to promise through the DBT mechanism.”
So, the Congress appears to have floated a half-baked plan for freebies just before polls without any granular details — with key figures within the party speaking in different voices — ostensibly to quote a handsome annual figure which Rahul hopes would be enough to buy the votes of the poor. Will such a plan work? We will have to wait just a little more for the answer.
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Updated Date: Mar 26, 2019 16:58:31 IST