Prior to Modi taking charge in 2014, the grand old party viz. Congress which ruled the country for over five decades, had institutionalized the culture of giving subsidies/doles, loan waivers, free power, job guarantee [in rural areas] and so on.
It had also achieved the dubious distinction of institutionalizing corruption and leakages from the budget earmarked for welfare schemes. With a major slice of funds pilfered on the way and not reaching the intended beneficiaries, majority of the poor remained in a state of poverty and deprivation. This also left little money for undertaking development projects by the state.
So, the economy was caught in a vicious trap of doles-corruption-slow growth with no space whatsoever for increasing job opportunities and income of the people including majority of the poor.
Modi changed the narrative with a pledge to empower the poor, create jobs and increase their income even while continuing with subsidies – even extending their coverage to include more poor. However, unlike the UPA – regime led by Congress, he has ensured that the benefit of subsidies reached the beneficiaries in full.
The government is also committed to doubling farmers’ income and has taken a number of steps to achieve the goal. Besides, under PM Kisan Samman Nidhi – announced in 2019-20 budget – it gives Rs 6000/- per year to small and marginal farmers [land holding up to 2 hectare] which benefits a total of 120 million farmers.
With general elections less than a month away, keeping a hawkish eye on the seat of power, Congress has resurrected its idea of doles to the poor. On March 25, 2019, Rahul Gandhi has promised to give Rs 72,000/- per annum to 20% poorest of the poor.
The party is targeting a total of 50 million families [or 250 million persons assuming 5 persons per family] to ensure that each family is assured of monthly income of Rs 12,000/-. A family earning less than this threshold will get direct benefit transfer [DBT] of an amount equal to the shortfall. For instance, if its monthly earning is Rs 6000/-, it will get DBT of Rs 6,000/-.
The amount is too big an allurement for the poor [this is 12 times a poor farmer gets under PM-KISAN]. Congress wants to use it to swing the election results in favor. Has it thought through the financial implications?
Giving income support to 50 million families @Rs 72,000/- per annum per family will cost the exchequer about Rs 360,000 crore annually. This is a huge number accounting for about 2% of GDP [gross domestic product]. But, the actual requirements could be many times more if the objective of guaranteeing Rs 12,000/- per month to all those earning less this amount is to be realized.
In 2014, a committee under Dr C Rangarajan had identified a poor person as one who earns less than Rs 32 per day or Rs 1000/- per month in rural areas and Rs 47 per day or about Rs 1500/- per month in urban areas. To reach the threshold set by Rahul Gandhi viz. Rs 12,000/-, the rural poor should get Rs 11,000/- a month whereas urban poor will be eligible for Rs 10,500/- per month.
Further, the committee had estimated the number of poor persons to be about 30% of the population. On current population of over 1300 million, this would be 400 million of which 300 million are rural poor and 100 million are urban poor. This translates to a total of 80 million poor families [5 persons per family] including 60 million in rural areas and 20 million in urban areas.
For income support to be ‘equitable’ and ‘non-discriminatory’, it is necessary that all 80 million poor families are covered. Any exclusion [under Congress plan, 30 million poor families will be excluded] would lead to an abhorrent scenario whereby a person getting DBT will end up having a monthly income of Rs 12,000/- per month even as another who gets excluded will continue to live with a measly Rs 1,000/- per month. This is totally illogical and unacceptable.
Therefore, equity and logic requires that all 80 million poor families get DBT. @Rs 11,000/- per month for 60 million rural and @Rs 10,500/- per month for 20 million urban, this would entail a mammoth outgo of Rs 1044,000 crore annually. This represents close to 6% of GDP. The ball does not stop here.
Rahul Gandhi considers every family earning less than Rs 12,000/- per month as poor. All such families should be helped to reach this income level. This means that all those earning more than Rs 1000/1500 – per month but less than Rs 12,000/- are eligible for DBT. Taking about 100 million persons in this income range, @Rs 6000/- per month, this would require Rs 720,000 crore.
Overall, the scheme will cost a mammoth Rs 1764,000 crore annually. This is about 10% of GDP and nearly 2/3rd of the total budget of union government [2019-20]. This will lead to fiscal disaster. It can’t be averted even if the centre withdraws all existing subsidies/support [food, fertilizers, petroleum, education, PM-KISAN, Ayushman Bharat etc] worth about Rs 530,000 crore annually.
Worse still, this will create a strong disincentive for majority of the families 180 million [3/4th of total] not to work. When, sitting at home, a person gets Rs 12,000/- a month, why would he work? Rahul says the moment a person crosses this threshold, he won’t be eligible. But, why would he attempt to increase his earning? This will bring all economic activity to a grinding halt.
For over 5 decades, Congress nurtured the cult of ‘doles-corruption’. If, it comes to power now, this cult will reach a ‘NADIR’ with implementation of the scheme. India needs to be saved from such a horrendous scenario. That will happen only if the public rejects this party in the coming elections – lock, stock and barrel.