CNBC TV18 Column : NYAY about time

NYAY – the Congress’ minimum income guarantee programme – i write in CNBC-TV18

In January, Rahul Gandhi, the President of the Congress Party, tweeted “We cannot build a new India while millions of our brothers & sisters suffer the scourge of poverty.  If voted to power in 2019, the Congress is committed to a Minimum Income Guarantee for every poor person, to help eradicate poverty & hunger.” Earlier this week, he announced the Party’s flagship programme for this election campaign, and for his government, if voted to power. NYAY – or justice – is an acronym for Nyuntam Aay Yojana. Mr Gandhi said “5 Crore of the poorest families in India, will receive Rs. 72,000 Per Year “ “Under this scheme a sum of Rs.6000 would be transferred to each of the 20% of the poorest families in India. A sum of Rs.72,000 per annum per family, that works out to 3.6 lakh crores, or 1.7% of the GDP that is pegged at Rs 210 Lakh crores.


Under the scheme, any family that has an income of less that Rs.12,000 per month, will be eligible for this direct transfer. While this is much higher than the minimum wages earned, it is much lower than the figure of 8 lakhs per annum set for the economically backward, for 10% reservations, set by the government. And, while 12,000 may seem like a lot of money, for a family of 5, it works out to Rs.2400 per month, per head.

Naturally, the announcement, both in January and now, has opened up a debate on Universal Basic Income, and whether India can afford it. Some of it is mindless – influencers on social media asking you what you would if your maids and drivers could afford not to do menial service; other more political – that this announcement is an election stunt. But, the most important question is that raised by commentators – some of whom are economists – and that question is can the Indian exchequer afford it?

The answer is simpler than we may think, and it is, can the Indian economy afford not to have a safety net for the most vulnerable families? For this, it may be better for us to look for signals from Europe than from America. The American experiment with the welfare state has been disastrous. However, Europe has lived for 70 years in peace, buttressed by the welfare state. Many historians believe that the root causes of both he first and second world war, as well as the revolutions – including the Russian revolution- that took place between the wars is directly attributable to poverty, unemployment and inflation. Post war, with their resolve of war no more, they went about rebuilding the economy. And, at the core of the economy was the creation of the welfare state. A benevolent state that made sure that no one was left behind, and that everyone had an equal chance of competing.

But, the welfare state did more than avoid war. It gave a boost to the economies of Europe. As people got more money in hand to spend, that is what they did. And, the act of spending, boosted the overall GDP of the country. This is the most basic form of Keynesian economics. Maligned as he was through the 1980’s and the monetarist Thatcher Regan era, and afterwards, it is Keynesian economics the world has turned to since the crash of 2008. Economies needed to be jumpstarted and pushed into the next orbit of development. And, what will help that happen is a good old fiscal stimulus. And, nothing will work towards boosting the economy more, than cash in the hands of 200+ million people – who can suddenly afford to buy food, clothes, and basics. And, this is possibly what Mr Gandhi and his advisors are hoping for.

India is not Europe, nor are we the United States of America. We have unique issues that need to be resolved. Poverty is a reality, despite the massive growth rates India has seen post liberalisation. And, with job creation falling, and farming unable to support families – poverty is not just about statistics, but a very real state that families find themselves. As per the Tendulkar Committee Report (2009)– 22% or 286 million Indians live in poverty; and as per the Rangarajan committee report (2014) 26.4% of the urban population, and 30.9% of the rural population live on less than Rs.47  and Rs.32 daily. This is untenable for a country that has aspirations for a seat at the high table. There will always be those who don’t want to share the fruits of prosperity with others. But a modern state cannot be one of those entities. Now that the genie of minimum income guarantee, a variation of Universal basic income, is out of the bottle, it will not be long before other parties embrace it. It will be a political necessity. It is time that all of us accepted that some variant of this will be introduced sooner rather than later. The time for economic justice has come. And, it is now.

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