April 2, 2019
As regards NYAY’s fiscal impact, Gandhi committed to fiscal prudence while announcing this scheme.
On March 25, Congress president Rahul Gandhi unveiled the Nyuntam Aay Yojana (NYAY) — minimum income scheme — an unconditional cash transfer programme for India’s 50 million poorest families. Since then, there has been a deluge of opinion pieces and commentaries across various media platforms — praise, criticism, questions, feedback galore — on the scheme. Such a vociferous debate and discussion on an important national policy proposal is welcome and healthy.
The economic idea of a basic income is not new. Neither is the idea of cash transfers. Back in 1968, 1,200 eminent economists wrote to then-US president Richard Nixon to introduce a basic minimum income (BMI) for the poor. In the Indian context, former chief economic adviser Arvind Subramanian proposed this idea in the 2017 Economic Survey. The chapter on BMI is perhaps the most comprehensive and detailed proposal that argued how India was ready for BMI.
Trickle-down benefits of GDP growth have eluded the poorest sections of society. Inequality has widened sharply.
Advances in technology and automation carry the risk of further exacerbating this gap. It is, therefore, imperative in any just society to target the weakest sections directly with a policy intervention to ensure a certain basic minimum level of dignity and self-respect for every family. Thus, the case for a direct cash transfer. A direct cash transfer not only provides income support and a safety net to the most-needy, but it also provides economic freedom and choice in how they use the cash.
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NYAY intends to provide a flat, uniform amount of Rs 6,000 a month to the poorest 50 million Indian families.
This entails a peak cost of Rs 3.6 lakh crore — 1.8% of India’s GDP today. A federal scheme, it will be piloted first and rolled out in phases in the first two years, with the involvement of states. Depending on India’s nominal GDP growth, at its peak, NYAY will cost between 1.2% and 1.5%.
Arvind Subramanian’s proposal of Rs 1,500 a month for 150 million rural households will cost 1.3% of GDP — which he also termed as “not reckless”. So, Gandhi’s proposal that would cost 1.2-1.5% of GDP is well within that limit. Subramanian also called for a ‘cooperative federalist’ financing that include states. Gandhi’s proposal does so too. Evidently, the NYAY proposal in terms of total costs and financing method is largely in accordance with the previous proposal.
Ostensibly, the only major difference is in the target beneficiary population. Subramanian argued for 150 million rural households to get Rs 1,500 a month, while NYAY targets the poorest 50 million households to get Rs 6,000 a month. Ideally, the question of which sections of the population should get an income support is best answered by elected politicians who represent the people, not by economists or bureaucrats. The administrative ability and ease of identification of target beneficiaries seems to be the overarching guiding force in the design of a BMI proposal for India.
Some economists believe it is much harder to target beneficiaries and, hence, it is better to give a lower amount of money to a larger number of people. Politicians believe that for a basic income proposal to have a real impact, it has to be a substantial amount to the neediest to help them escape the poverty cycle. Tailoring a policy for administrative ease, rather than for its impact potential, is akin to cutting one’s feet to fit into smaller shoes. So, the problem statement is one of identifying India’s poorest 50 million families.
One must be a little more imaginative, and not be in thrall to the old mindset, to accept and solve the challenge of beneficiary identification. With the numerous income proxy data sets, advances in big-data science and technologies, Aadhaar and some new, unique data sets available today, beneficiary identification is highly possible. The challenge of the identification of the 50 million poorest households cannot be an alibi to not embark on this programme.
When political parties in India today can identify their supporters in every household using big-data techniques, it shouldn’t be as hard to identify the poorest 50 million households in India as it’s made out to be. On a side note, when finance minister Arun Jaitley, in a press conference on February 1, 2018, with his entire economic team in tow, announced the Ayushman Bharat scheme to provide health insurance to 100 million poorest families, there was neither any question nor any explanation about identifying beneficiaries.
As regards NYAY’s financing and its fiscal impact, Gandhi categorically committed to fiscal prudence while announcing this scheme. It is impossible at a manifesto stage to detail out an entire Budget proposal. But it is entirely possible to finance 1.2-1.5% of GDP with burden sharing by the states through a combination of increased revenues and expenditure rationalisation, without cutting any of the core welfare programmes of food, fuel, fertiliser, NREGA (National Rural Employment Guarantee Act) scheme, health and education.
In 1947, with 70% of its population in poverty and the adoption of a universal adult franchise at birth, India defied conventional global wisdom to not just survive as a nation but prosper. India’s poverty rate is now down to 20%. It is now time again to launch that final assault on wiping out the last remains of poverty with a similar bold and ambitious programme that may seem to defy convention through NYAY.
The writer is Chairman, data analytics department, Congress
( Originally published on Apr 01, 2019 )
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)