Opinion

The NYAY scheme is a game changer

Bhalchandra Mungekar | Updated on April 12, 2019 Published on April 12, 2019

The Congress’ minimum income guarantee scheme will lift millions out of poverty. The fiscal issue is being overblown

The Congress Party’s 2019 election manifesto has promised a ‘Minimum Income Guarantee Scheme’ (MIGS), formally called Nyuntam Aay Yojana (NYAY), to five crore ‘poorest families ’ covering 25 crore people by assuring them a guaranteeing minimum income of ₹6,000 per month or ₹72,000 a year.

Let’s now deal with some of the criticisms on this scheme.

The first question is how the cut-off point of ₹12,000 was arrived at for determining the ‘poorest household’. One may recall that the Congress-led UPA government had appointed two committees to estimate the BPL income: The Tendulkar Committee in 2005 and Rangarajan Committee in 2012. Both treated a household to be five persons. According to the Rangarajan Committee rural and urban households with income (expenditure) less than ₹4,860 and ₹7,035, per month, respectively, were treated as BPL. When adjusted against inflation since then, the average cut-off line of ₹12,000 per month appears justifiable.

Second, even the poorest family is assumed to have ₹6,000 income, so on an average, it will need only ₹6,000 per month to cross the poverty line.

Third, the scheme will require ₹3.6-lakh crore per year. It amounts to 1.9 per cent of the GDP. Now where this money come from? This should not be a big problem.

According to World-Bank and IMF estimates, India’s nominal income in 2018 was about ₹185 lakh crore ($2670 billion), and India was the seventh largest economy in the world. In this situation, 25 crore poorest people could legitimately claim 1.9 per cent as their share in the national income. If the Centre can spend more than ₹1 lakh crore on its 85 lakh employees (45 lakh in service and 40 lakh pension-holders) as per the Seventh Pay Commission’s recommendations; and if the same amount of money is spent towards oil subsidy to reduce the so-called losses of the oil-companies— why should 25 crore people not deserve ₹3.60-lakh crore or 1.9 per cent of the national income?

Also, the poorest mainly come from the socio-economically disadvantaged sections such the SCs, STs, widows, children, artisans, slum-dwellers, and so on. But efforts will have to be made to find additional resources. Raising direct taxes on the rich and super-rich, integrating some other schemes such the MGNREGA, drastically reducing unproductive expenditure, are some of the options available. Of course, expenditure on health, education, and sanitation must not be reduced; in fact, it must be increased progressively.

Fourth, some have raised the question that the scheme will have adverse fiscal repercussions. There is no reason to believe that the increase in fiscal deficit would amount exactly to 1.9 per cent of the GDP. But what is more important here is that one has to draw a distinction between ‘fiscal profligacy’ and legitimate development and welfare expenditure.

Had the UPA II not wisely relaxed the fiscal constraints in 2008-09 and enhanced public expenditure, the Indian economy would not have grown by 6.8 per cent (the second fastest growing economy after China ) in the midst of the global financial crisis. I have always argued in the Planning Commission and in the Rajya Sabha that, in a democratic but highly unequal society as India, a sacrosanct pursuit of fiscal deficit targets cannot be an objective of economic policy. Implementing the minimum income guarantee will be a challenge. But with a strong will and commitment to make a dent on poverty, it should made possible.

The BJP has been under pressure on several fronts — demonetisation, faulty implementation of GST and farm distress. But post-Balakot air strike, the party began to run a high-decibel campaign based on national security.

The Congress’ NYAY scheme has pushed the BJP on the backfoot.

The writer, a former member of the Planning Commission and Rajya Sabha, was also a member of the Congress party’s national manifesto committee

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Published on April 12, 2019
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