Is Congress's NYAY scheme workable?

Critics have questioned the fiscal prudence and workability of Congress's NYAY

20-Rajnath-Singh-Narendra-Modi-and-Amit-Shah Promises made: Rajnath Singh, Narendra Modi and Amit Shah at the release of the BJP manifesto | Sanjay Ahlawat

About four months ago, the Congress began mooting the idea of an unconditional cash transfer into the accounts of poor families. Party president Rahul Gandhi was keen that the idea be fleshed out and presented as a workable scheme. Former Union minister P. Chidambaram and Praveen Chakravarty, the party's prime data cruncher, were entrusted with the task.

In the next five-year period, the GDP is expected to grow to 1400 lakh crore. There is enough capacity to attempt ambitious programmes such as NYAY. —P. Chidambaram, former Union minister
Even after giving that slogan (garibi hatao), if today you think that 20 per cent people don't even have an income of 112,000, then the cross hangs on your neck for letting down the poor. —Arun Jaitley, Union finance minister

The inspiration, it is said, came from the writings of economists Thomas Piketty and Lucas Chancel, whose works Rahul is reportedly familiar with.

The Congress team consulted the two, and many more economists, including former RBI governor Raghuram Rajan and former chief economic adviser Arvind Subramanian.

The idea was firmed up at a lunch hosted by Chakravarty at his Mumbai residence, where Chidambaram and some economic experts were present.

Rahul, however, was keen that former prime minister Manmohan Singh be consulted before anything was finalised. The economist-turned politician was in favour of the scheme, but asked the team to account for fiscal prudence.

And then, on March 25, Rahul announced the scheme, named NYAY (Nyuntam Aay Yojana), and said it was “the final assault on poverty”. A week later, launching the manifesto, he said, “The prime minister had promised Rs15 lakh in every account. It is clear that it was a lie. We took inspiration from [the idea], and we discussed what realistically could be put into the accounts of the poor.”

They arrived at the figure of Rs72,000 per annum, to be transferred to the accounts of the 20 per cent poorest families. This works out to Rs6,000 per month for five crore families, the total beneficiaries being around 25 crore. The Congress hopes that the proposal will have a sizeable impact in the Lok Sabha elections, as the party feels unemployment and agrarian crisis are the most important issues this time. Rahul, in fact, repeatedly asked reporters at the March 25 news conference if they were “shocked” at the announcement. The party also hopes that the scheme would shift the narrative from issues of nationalism and hindutva, which the BJP is focusing on.

P. Chidambaram P. Chidambaram

With NYAY, the Congress wants to continue projecting itself as “pro-poor”, in contrast with Prime Minister Narendra Modi, whom the party has accused of indulging in crony capitalism and not being concerned about the poor, the unemployed, the farmers and the marginalised.

Rahul's teaser mention of NYAY at an election rally in February was meant to preempt any such announcement by the Modi government in the budget. And, sure enough, the NDA government, in the interim budget, announced Rs6,000 a year to farmers under the Pradhan Mantri Kisan Samman Nidhi scheme.

The national players aside, regional parties, too, have been promising income support through cash transfers. The Telangana government's Rythu Bandhu scheme, which is said to have helped K. Chandrashekar Rao win the recent assembly elections, gives Rs10,000 per acre a year to all farmers. In Odisha, a few months ago, the Naveen Patnaik government announced Krushak Assistance for Livelihood and Income Augmentation (KALIA), a scheme that provides Rs25,000 to every farming family over five seasons. In West Bengal, the Mamata Banerjee government is implementing Krishak Bandhu, a scheme that gives farmers Rs5,000 per crop per acre.

Arun Jaitley Arun Jaitley

However, in its scope and expanse, NYAY is unprecedented. Chakravarty, who heads the Congress's Data Analytics Department, even described it as “the most audacious economic idea in the world”.

Said senior Congress leader Abhishek Manu Singhvi: “In the past few days, starting with the prime minister, the finance minister and down to the BJP supporters, there is palpable nervousness regarding NYAY. The nervousness is evident in the kind of reactions that are coming. They are forgetting that their own chief economic adviser had suggested such a scheme.”

The ruling BJP has countered the Congress's claims, with Finance Minister Arun Jaitley blogging that the party has a legacy of slogans with no resources. “It has a history of bluff announcements.... Even after giving that slogan (garibi hatao), if today you think that 20 per cent people don't even have an income of Rs12,000, then the cross hangs on your neck for letting down the poor of the country,” he said.

He also pointed out that the Central government spends Rs1,06,800 per household a year on ongoing welfare schemes, as opposed to the Rs72,000 the Congress has promised. The annual spending on welfare schemes, which includes subsidies, is Rs5.34 lakh crore, he said.

The BJP can also claim that while NYAY is just a promise, more than two crore farmers have already benefited from the Pradhan Mantri Kisan Samman Nidhi.

Said Raghuram Rajan, one of the economists the Congress claims to have consulted: “I do not see all these things as a version of universal basic income. I do see them as poverty relief. But poverty relief should come with empowerment, so that the recipient finds a way to work out of the situation.”

Economist Surjit Bhalla, on the other hand, questioned the political sagacity of the scheme, saying that by targeting the poorest 20 per cent, the Congress would only end up alienating about 40 per cent of the population. “Or is the party banking on the idea that the rest 40 per cent are thinking that they come under the poorest 20 per cent?” Bhalla asked.

The Congress, however, insists that NYAY is not mere populism and is a result of intensive research, background work and consultations with economic experts abroad and in India. And on the question of fiscal prudence, Chidambaram said, “In the next five-year period, the GDP is expected to grow to Rs400 lakh crore. There is enough capacity to attempt ambitious programmes such as NYAY. The Congress sets ambitious goals that are achievable by a wise and able government.”

The party also claims that the scheme would result in re-monetisation by putting cash back into the economy, which is suffering after demonetisation. It further argues that NYAY will have the same kind of positive economic impact that MNREGA had, with increased spending and consumption boosting the economy.

NYAY is indeed ambitious. And it aims to set the tone for the Lok Sabha elections. But the big question is—will it resonate with the people?

TAGS