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Will Congress president Rahul Gandhi's proposed minimum income guarantee scheme, Nyuntam Aay Yojna, or NYAY, free India from poverty? This question was asked by India Today to six economists.
Here is my reply. You can see the detailed response from all of us if you click on the link at the end of the interview.
Q: Is a scheme that promises Rs 72,000 a year to 25 crore Indians below the poverty line economically viable?
Surely, implementing a guaranteed minimum income package benefitting 20 per cent of India’s poorest is economically viable. It all depends on the intent behind it. If the government wants to really help the poorest, finding adequate money is never a problem. But I find it strange that this question is invariably asked whenever some allocations are made for the poor. No one asked when the 7TH Pay Commission was announced, which when implemented across the States, PSUs, Colleges/Universities will bring in an additional annual burden in the range of Rs 4.5 to Rs 4.8-lakh crore every year. No one ever asked the same question when massive corporate bad loans are written-off by the banks, Rs 3.17-lakh crore between 2014 and 2018. Former CEA Arvind Subramanian had even said that writing-off corporate loans leads to economic growth. But on the contrary waiving farm loans for the poor farmers are viewed as credit indiscipline. This is a reflection of the inherent bias in modern economic thinking.
Q: What do you think will be the challenges in implementing such a scheme?
Although Rahul Gandhi has still to spell out the delivery mechanism that is expected to provide Rs 6,000 every month to 20 per cent poorest households in the country, the task of indentifying the real beneficiaries will certainly be an administrative nightmare. Estimating the income level of the poor to draw out the real beneficiaries will of course be a cumbersome process. But I am sure as the scheme progresses, since it is to be implemented in a phased manner, it will be possible to iron out the bottlenecks and remove other hurdles. It has to be planned in such a manner that it turns out to be inclusive.
Take a lesson from Telangana, which launched the much talked about Rythu Bandhu scheme, providing direct financial support twice in a year to farmers. In 2018 kharif season, Telangana government has transferred Rs 5, 257-cr to over 51 lakh farmers. Not a small achievement but before launching the scheme, Telangana officials had moved in swiftly across the districts to set the land records right and to remove other hiccups. If the will is there, a suitable pathway can always be created.
Q: Will it address the issue of rural distress and can it boost the economy?
Investing in rural areas is the only viable long term solution to many of the problems India faces – hunger, poverty, youth unemployment, forced migration and climate change. The promise of Rs 72,000 per year to the poorest points to a significant shift in economic thinking – moving from credit to income support. More money in the hands of the rural poor means more demand will be created, and more demand will reignite the wheels of the industry thereby boosting economic growth.
Considering a decline in casual farm labour to the extent of 40 per cent between 2011-12 and 2017-18, and even the non-farm wages shrinking in the last five years, the job crisis in rural areas is certainly explosive. Added with the steeply declining farm incomes, which have already touched the lowest in 14 years, rural India is crying for attention. More so at a time when public sector investments in agriculture had remained abysmally low, hovering between 0.3 to 0.5 per cent of the GDP between 2011 and 2017. Rural India therefore is the future. In fact, I have been saying for long that addressing rural distress, beginning with revival of agriculture alone has the potential to reboot the economy.
Q: What are the long term implications of such a scheme on poverty reduction?
In the long-term, direct income support is one of the major effective instruments to fight poverty. MNREGA in that sense is a classic example. This has to be of course accompanies by a set of economic reform measures, including investments education, health and rural infrastructure. Providing more money into the hands of the poor, who also carry dreams and aspirations like anyone else, gives them an opportunity to unleash their entrepreneurship ability.
To be born in debt and live in debt all through his life is virtually like living in a hell. Normally the poor, and that includes farmers, often are born in debt and die in debt. A direct income support provides them an opportunity to emerge out of the shackles of indebtedness. And this will have long term consequences in making poverty history.
Trickle-down theory has failed to make an impact. Trickle-up is what is desperately required.
Q: How does the promised scheme compare with existing welfare schemes of the government?
The proposed Nyay scheme should not be considered as a welfare scheme that we generally know about. It is an income augmentation scheme, and should be considered as a powerful mechanism to revitalise economic activity in the rural areas thereby reducing rural to urban migration. It will reduce inequality, help reduce rural distress, and pull out masses from abject poverty. Unlike the existing 950 central government schemes, direct income support alone has the potential to reboot the rural economy, and if executed well it may perhaps change the face of Indian economy – leading truly to Sabka Saath Sabka Vikas.
Q: Do you think it will help the Congress woo the electorate better?
Well, that depends on how the Congress is able to take the message to the masses. #
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