The Congress has come up with a minimum income guarantee scheme, Nyuntam Aay Yojana (Nyay), to help the poorest of the poor. Party president Rahul Gandhi recently announced Nyay while addressing the media after the Congress Working Committee meeting in New Delhi. This, he said, will help the 20 per cent of the poorest families. This translates into five crore families and about 25 crore people.
The GOP has promised that, if elected, it would ensure that these get an income of Rs 12,000 per month. The minimum income threshold is Rs 12,000, Gandhi said. “Any family earning less than this, the government will pay the difference.” That is, if a family earns, say, Rs 7,000 per month, the remaining Rs 5,000 will be credited to its account.
It may be recalled that former chief economic adviser Arvind Subramanian was the first to introduce this idea. In Economic Survey 2016-17, he called it a universal basic income (UBI)—a fixed amount to be given to everybody in the country so that there were no issues about identifying the beneficiaries. Hence the universality.
Telangana Chief Minister K. Chandrashekar Rao executed it in a slightly changed and reduced form. Under this scheme, farmers were given Rs 8,000 per acre per year payment as farming costs, irrespective of the size of farms. This benefited about 5.8 million landowning farmers. This helped him win the last Assembly polls impressively.
In a bid to win back agriculturists, who are not very happy with the Bharatiya Janata Party, the government came up with its own version of UBI, called PM-Kisan, which was spelled out in this year’s interim Budget. The PM-Kisan gives Rs 6,000 to farmer families with cultivable land up to two hectares. In the interim Budget, Finance Minister Piyush Goyal said, “This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of Rs 2,000 each. This programme will be funded by government of India. Around 12 crore small and marginal farmer families are expected to benefit from this.”
The Congress’ Nyay, however, is more comprehensive, as it intends to benefit all, farmers as well non-farmers.
The BJP’s reaction to it has been on expected lines. Finance Minister Arun Jaitley termed it as a “bluff announcement.” He blockquoted the famous Garibi hatao slogan that Indira Gandhi came up with for the 1971 elections and won handsomely. “But she did not believe in the things that are needed for such a task, such as creating wealth in society and then distributing it. She did not believe in increased productivity or wealth generation. She only believed in redistribution of poverty.”
He is correct in his observation that Indira Gandhi, guided by the Left as she was in those days, didn’t believe in increased productivity or wealth generation. So, the war against poverty actually became a war on the rich and the producing classes. The personal income tax rate went as high as 98 per cent; a myriad of rules and regulations were worked by her socialist cronies and thrust upon industry by bureaucrats. Economic growth and development suffered; infrastructure building took a back seat; corruption soared; little could be done to remove poverty. Unsurprisingly, she ended up distributing poverty. As Winston Churchill once said, “You don’t make the poor richer by making the rich poorer.”
Rightly put, Mr. Jaitley, but what about the policies and performance of your own government? If Nyay is bad, is PM-Kisan good? What is sauce for the goose is sauce for the gander. It can’t be that the Congress’ populism is bad but the BJP’s good.
Nyay is bad for several reasons. First, it regards the poor not as human beings but as dependents who will always need charity. It dehumanizes the poor.
Second, the premises of the proposed scheme are wrong. For the poor, like most other people, earn their own living. If the environment is conducive, they can not only survive but also thrive. What the government should, therefore, do is to ensure that the law and order situation is proper, the infrastructure is good, and the judicial system is functional. This can happen only if government is focused on governance, but populism distracts politicians’ minds to fancy schemes. Governance suffers; the environment does not remain conducive for wealth creation. This reduces chances of poverty eradication. The unintended consequence becomes the opposite of the stated objectives of such schemes.
Third, schemes like Nyay are a burden on the taxpayer and a drain on the exchequer. As it is, the fiscal situation is not good. The government has been squeezing public sector undertakings to meet the fiscal deficit targets. In fact, as per the recent Budget figures, out of every rupee the government spends, as many as 18 paise are paid as interest payments, whereas it receives 19 paise by way of borrowings. We seem to be hurtling towards a debt trap.
As it is, government finances are in a mess. Even spending in critical areas like defence is being tightened. A little more than a year ago, the Army had officially complained about shortages of arms, ammunition, and equipment. With Pakistan and China refusing to mend their ways and behave in a civilized manner, it is dangerous to curb expenditure on defence.
In short, Nyay may or may not help the Congress in the forthcoming election but, if implemented, it will surely hurt the country.