Nyay: Yet Another Political Illusion For The Elections
The newly unveiled plan by the Congress Party to provide a minimum income guarantee to the poorest in the country has sparked a controversy as advocates for and against it are voicing their views in no uncertain terms. The proposal has been criticized, by one segment of economic writers for being too expensive, discriminatory and difficult to implement. On the other hand, it is being commended by others as being visionary and achievable without too much strain despite the estimates that it could cost up to Rs. three to four trillion. The fact is, the scheme is modeled loosely on the much-debated universal basic income concept that was outlined by former chief economic advisor Arvind Subramaniam in the 2016-17 Economic Survey. The Congress proposal is being described by some as the UBI but it differs in many ways from the original idea.
One also needs to mention in this context that the plan seems to have been an effort to leap ahead of the ruling Bharatiya Janata Party after the NDA government launched its scheme to provide Rs. 6000 annually to farmers. This amount is far lower than the Congress plan which envisages Rs. 72000 every year to the poorest 50million in the country. But the announcement had brought cheer to famers at that time when agrarian distress was rising and kisan marches had brought this crisis to the attention of the nation.
As for the original UBI, it envisages that everyone in a nation receives a fixed amount of income. This is to be given to individuals, rather than to one person in a household, as is envisaged in the Congress plan. Thus each individual in a family receives a stipend with money for children below 18 being given to a parent. The idea of a universal income to insulate people from the vagaries of the labour market actually emanated from developed countries which have been worried about the prospect of automation reducing jobs availability for humans. The history of this concept goes back even further as intellectuals and writers in western countries felt the need for a basic income to eliminate inequalities even several centuries ago.
In recent times, the idea of the UBI has been revived by many economists including Guy Standing and has been supported by leading lights of Silicon Valley like Elon Musk and Mark Zuckerberg. Not only that, several trials of the UBI have been carried out in countries as diverse as Finland, Kenya, the U.S. and even India. The positive results of the trials, however, have not led to any decisions to implement the schemes on a larger basis. Mainly because of the costs involved, even for affluent countries like Finland and the U.S.
The scheme, termed Nyuntam Aay Yojana or Nyay, as outlined by Rahul Gandhi, however, is different on many counts. First, it is not a universal scheme. It is limited to 20 per cent of the population that has been identified as the poorest. Second, the income will be paid per household and not per individual. It is planned to cover 50 million households and assuming that each one comprises of five persons, it will cover 250 million people. Third, there is an element of topping up incomes that is not envisaged in the UBI. It has been mentioned that the income of those below Rs. 12000 per month will be brought to that level.
So clearly this is not the universal basic income scheme. It remains discriminatory even though it will be argued that such discrimination is for the public good. The amount given will also be diluted as it has been allocated per household. The Nyay scheme envisages that Rs. 72000 annually or Rs. 6000 monthly will be paid to the 50 million households that are the poorest in the country. But it translates into Rs. 1200 per month or Rs. 14400 annually per individual in the household. And that will be even less if the household is larger. In addition, the UBI is meant to be introduced by eliminating all other types of income support to the people including subsidies. In this case, the income simply becomes an additionality along with all the other multifarious subsidies in this country.
At the same time, it can become a gamechanger for the Congress in the elections if it is well projected by the party. Whether it can be implemented ultimately without creating fiscal imbalances is another question altogether. The financing of the scheme is bound to be problematic. At a time when the Goods and Services Tax has subsumed most other taxes, it would be retrograde to introduce any cess or surcharge to finance it. Similarly, the proposal by some left activists to tax the rich to fund Nyay is bound to make investors nervous at a time when the economy is in need of greater capital inflows. In fact, recognizing this fact even the Congress has announced it will withdraw the angel tax on start up ventures.
Apart from being a huge drain on the exchequer, it would surely be better to opt for schemes that will provide some form of employment including enhancing skills.Some economists have suggested that a universal employment scheme be launched rather than a minimum income guarantee for the poorest. It would be more sustainable and achieve more tangible results in the long run.
In any case, it is clear that the scheme has been evolved to evoke a reaction at the hustings and has not been well thought out especially the financial aspects. The Congress has denied any such allegations and maintains that there have been prolonged discussions with economists including former central bank governor Raghuram Rajan. Even leading international economist Abhijit Banerjee said that he had provided inputs for it but proposed a much lower income guarantee than Rs. 6000 per month. The plan may thus have been discussed with many experts but the financial element has evidently been glossed over before being announced. In case the Congress does come to power, the big uncertainty will be whether it can finally implement the promise in its present form. If it does not, it will become yet another political illusion aimed at gaining votes in this round of general elections.
(Views expressed by the writer are personal)