The Congress has assured regular income for the poor but how will it identify the beneficiaries? And won’t the NYAY scheme burden the economy?
During its over five decades of rule, the Congress institutionalised the culture of doles in the name of its much trumpeted garibi hatao (poverty alleviation) programme even as majority of the people continued to remain poor. Even Prime Minister Modi continued with doles but changed the narrative with a pledge to empower the poor, create jobs and increase their income to ensure that these benefits reached the beneficiaries in full. Besides, under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, his Government is giving Rs 6,000 per year to 120 million small and marginal farmers. With general elections nearing, the Congress has resurrected its doles idea with a big bang. On March 25, Congress chief Rahul Gandhi promised Nyuntam Aay Yojana (NYAY) scheme, under which Rs 72,000 would be deposited per annum to India’s 20 per cent poorest families.
The party is targeting a total of 50 million families to ensure that each family is assured a 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 6,000, it will get DBT of Rs 6,000. The offer on the table is juicy (this is 12 times a poor farmer gets under PM-KISAN). But has the grand old party given a thought on its financial implications? According to the plan, the scheme will cost the exchequer about Rs 3,60,000 crore annually. This in itself is a huge amount that is capable of destabilising the overall Budget of the country.
Further, the actual need could be many times more than thought. By drawing the line at Rs 12,000 per month and repeatedly proclaiming that all families, who earn less than this amount, will be enabled to reach this level, Congress chief Rahul Gandhi has raised the aspiration level to a new high. To gauge the magnitude of the burden, let us look at the following facts. In 2014, a committee under C Rangarajan had identified a poor person as one who earns less than Rs 32 per day or Rs 1,000 per month in rural areas and Rs 47 per day or about Rs 1,400 per month in urban areas. Taking inflation at four per cent per annum, the current poverty line would be Rs 1,200 per month and Rs 1,700 per month in rural and urban areas respectively.
Further, the committee had estimated the number of poor people to be at 30 per cent of the population. With current population at around 1.32 billion, this consequent figure will 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 (five people per family), including 60 million in rural areas and 20 million in urban areas. To reach the threshold, viz Rs 12,000, the rural poor should get Rs 10,800 a month whereas the urban poor will be eligible for Rs 10,300 per month. For 60 million rural and 20 million urban families, this would require a mammoth Rs 1025,000 crore annually (any exclusion merely to lower the outgo is untenable as it will create divisions among the poor with the lucky ones getting Rs 12,000 per month and others continuing with measly Rs 1200-Rs 1700 per month).
The ball does not stop here. All those earning more than Rs 1,200-Rs 1700 per month but less than Rs 12,000 cannot be left out either. Taking a conservative 100 million people in this income range, Rs 6,000 per month top-up on an average, this would require Rs 720,000 crore. That takes the grand total to Rs 1745,000 crore or close to 10 per cent of the GDP. This will consume nearly two-third of the Centre’s total budget (2019-20) and almost all of its tax revenue. Even if the Government withdraws all existing subsidies like those of food, fertilisers, petroleum, PM-KISAN and Ayushman Bharat among others — this is unthinkable in the current socio-political-economic scenario. To cite an example, can a poor man, who gets wheat at Rs 2 per kg under National Food Security Act, afford to buy it at over 10 times? The scheme would still need a huge Rs 12,15,000 crore. Can the scheme then be funded through increase in tax revenue? This is unimaginable as it will require doubling of tax collections (67 per cent increase if subsidies are withdrawn). The Congress’ NYAY scheme will lead to fiscal imbalance, entailing crisis on multiple fronts viz, high twin deficits (fiscal and current account), run-away inflation, unsustainable debt, exorbitant interest rates and steep decline in economic growth. Even worse, this will render majority of the work force dysfunctional. When a person gets Rs 12,000 a month for doing nothing, why would he/she work? One shudders to think of the negative impact this will have on the availability of workers, farms and a host of other economic activities. At present, there is hardly any data on the income of households. So, identification of deserving families will be a Herculean task. Using technology for DBT will be no less daunting. Furthermore, this will be an open invitation to corruption as people clamour to get certificates showing income more than Rs 12,000. At the moment, while the idea is dreamy, there are some hard practicalities to be dealt with.
(The writer is a freelance journalist)
https://www.dailypioneer.com/2019/columnists/where-are–the-funds-.html